Many investors are looking at how to diversify their portfolios as cheaply as possible, such as owning Australian Foundation Investment Co. Ltd (ASX: AFI) 'AFIC' shares.
Unlike an exchange-traded fund (ETF), owning shares in AFIC means owning a portion of the company, not just a stake in a particular investment portfolio. An example of a popular ETF is the Betashares Nasdaq 100 ETF (ASX: NDQ).
At close of trade yesterday, the AFIC share price was $8.56 – even on the previous close. It is up 0.12% to $8.57 in early trade today. For context, the S&P/ASX 200 Index (ASX: XJO) was pummelled yesterday, finishing the day 1.90% lower. However, at the time of writing, it is up 0.8% today to 7,428.2 points.
If you're looking to invest in AFIC, you might be curious as to what its philosophy is, how it invests, and most importantly – what it's invested in.
Let's take a closer look.
Image source: Getty Images
Company philosophy
According to the company's website, AFIC invests in between 60-80 companies across a range of industries. It says these companies are selected because of their "ability to perform through economic cycles and generate returns over the long term".
The company's total portfolio is worth about $9 billion. This is slightly under its market capitalisation of $10.5 billion. It pays an annual dividend of 24 cents per share, fully franked, and claims to have a management expense ratio of 0.14%. AFIC describes itself as "very low cost".
What shares do you own when you own AFIC shares?
AFIC lists the top 25 investments it holds in its portfolio – which combined makes up more than three-quarters of its entire investment mix. These are the shares you own if you own AFIC shares.
| Name | Sector | Portfolio value ($ million) | Portfolio percentage (%) |
| Commonwealth Bank of Australia (CBA) | Banks | 790.9 | 8.4 |
| CSL (CSL) | Healthcare | 681.7 | 7.3 |
| BHP Group (BHP) | Resources | 611.8 | 6.5 |
| Wesfarmers (WES) | Retail | 442.0 | 4.7 |
| Westpac Banking Corporation (WBC) | Banks | 401.4 | 4.3 |
| Macquarie Group (MQG) | Diversified Financials | 367.9 | 3.9 |
| Transurban Group (TCL) | Transportation | 349.7 | 3.7 |
| National Australia Bank (NAB) | Banks | 309.3 | 3.3 |
| Mainfreight (NZX:MFT) | Transportation | 295.8 | 3.1 |
| Woolworths Group (WOW) | Consumer Staples and Discretionary | 267.9 | 2.9 |
| James Hardie Industries (JHX) | Materials | 253.4 | 2.7 |
| Australia and New Zealand Banking Group (ANZ) | Banks | 236.4 | 2.5 |
| Rio Tinto (RIO) | Resources | 208.7 | 2.2 |
| Telstra Corporation (TLS) | Communications | 208.5 | 2.2 |
| Sydney Airport (SYD) | Transportation | 204.1 | 2.2 |
| Amcor (AMC) | Materials | 202.9 | 2.2 |
| ARB Corporation (ARB) | Consumer Staples and Discretionary | 181.5 | 1.9 |
| ResMed (RMD) | Healthcare | 170.8 | 1.8 |
| Sonic Healthcare (SHL) | Healthcare | 160.8 | 1.7 |
| Goodman Group (GMG) | Real Estate | 154.6 | 1.6 |
| Carsales.com (CAR) | Communications | 151.9 | 1.6 |
| Reece (REH) | Materials | 150.4 | 1.6 |
| Coles Group (COL) | Consumer Staples and Discretionary | 147.5 | 1.6 |
| Ramsay Health Care (RHC) | Healthcare | 131.9 | 1.4 |
| Xero (XRO) | Technology | 126.5 | 1.3 |
AFIC shares history
Over the past 12 months, the AFIC share price has increased by 36% – overperforming the ASX 200 by about 11 percentage points.
Year-to-date, AFIC shares have appreciated by 16%. Again, they have outgrown the ASX 200 in 2021 – this time by about 5 percentage points.
