Australian Foundation Investment Co.Ltd. (ASX: AFI), also known as AFIC, is one of the most popular investments for young Aussie investors.
What is AFIC?
This business is a listed investment company (LIC). It is actually one of the oldest LICs on the ASX – the LIC was listed in 1928.
The purpose of an LIC is to find and invest in assets on behalf of their shareholders. Essentially, people can delegate their investment decisions to the LIC.
AFIC enables people to easily invest indirectly into a portfolio of (mostly) ASX shares. It offers a diversified portfolio which has a target of between 60 to 80 meaningful positions across a range of industries that are selected for their ability to perform through economic cycles and generate returns over the long-term.
How popular is the LIC?
According to reporting by the Australian Financial Review, online broker Pearlier has revealed that AFIC is one of the most popular investments for millennials. It was the 12th most held investment among its mostly younger Aussie investors.
Not only was AFIC popular, but Argo Investments Limited (ASX: ARG) was 15th. That may imply that young investors appreciate the long-term focus and structure of LICs.
Pearler co-founder Nick Nicolaides said:
There's definitely appreciation for how and where these companies came from. They did not come from a bona fide capitalist approach to funds management. They were born out of a need to effectively manage money for a member base.
According to Pearler, LIC investments with its members were approximately 15% of the $200 million in customer holdings, which was a similar size to directly held ASX shares. Exchange traded funds (ETF)s made up most of the rest of the investments.
What are some factors that make AFIC a popular investment?
It was noted in the AFR reporting that investors may like the low costs offered by AFIC.
AFIC itself boasts that it has very low costs. The LIC says "low management costs and no performance fees let you enjoy the benefit of your investment". The management cost is 0.14% per annum.
Dividends are another feature of the LIC. AFIC aims to provide shareholders with long-term returns and dividends that grow faster than the rate of inflation.
For its November 2021 update, the LIC revealed that its net asset per share growth plus dividends (including franking) return over the last five years has been an average of 12.4% per annum, outperforming the ASX benchmark's return of 11.6% per annum over the same time period.
What shares are in the LIC portfolio?
AFIC updates the market monthly about the different businesses in the portfolio.
The biggest five positions in the portfolio at the end of December 2021 included: Commonwealth Bank of Australia (ASX: CBA), CSL Limited (ASX: CSL), BHP Group Ltd (ASX: BHP), Macquarie Group Ltd (ASX: MQG) and Wesfarmers Ltd (ASX: WES).
Some of the other businesses in the top 25 include: Telstra Corporation Ltd (ASX: TLS), Goodman Group (ASX: GMG), Reece Ltd (ASX: REH), ARB Corporation Limited (ASX: ARB), Sonic Healthcare Ltd (ASX: SHL) and ResMed Inc (ASX: RMD).
In recent years, AFIC has started investing in international shares as well. Whilst the combined global portfolio was only worth $47.6 million at 30 June 2021, it included names like Alphabet, Microsoft, Chipotle, McDonalds and Nike.
