Considering AFIC shares? Here's what you're buying

This LIC offers a lot of diversification.

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Buying Australian Foundation Investment Co Ltd (ASX: AFI) (AFIC) shares comes with a lot of different underlying investments.

Although an individual company, a listed investment company (LIC) invests in other shares for shareholders. Some LICs invest in areas like Asian shares, global shares, or ASX shares.

AFIC is one of the largest and oldest LICs in Australia and primarily invests in ASX shares. It aims to provide shareholders with "attractive investment returns through access to a growing stream of fully franked dividends and enhancement of capital invested over the medium to long term."

Which ASX shares is AFIC invested in?

The LIC has dozens of holdings, but AFIC tells the market its top 25 holdings every month, which amount to around 80% of the portfolio's overall value.

Before getting to the individual names, let's consider the sector allocations. At 30 June 2024, the business had the following weightings: banks (20.8%), materials (14.3%), healthcare (13.2%), industrials (10.8%), other financials (9.2%), consumer discretionary (7.9%), communication services (6.5%), real estate (5%), consumer staples (4.1%), energy (3.8%), IT (2.7%), and cash (1.7%).

The AFIC portfolio has a much smaller allocation to banks and miners than its benchmark, the S&P/ASX 200 Accumulation Index (ASX: XJOA), which has a weighting of around 50% to those two sectors.

I'll now list each position in the portfolio with a weighting of at least 2%:

Many of these stocks are some of the largest and strongest ASX blue-chip shares in Australia, so the portfolio is representative of Australia's economy.

AFIC performance

According to AFIC, its net asset per share growth plus dividends return, including franking, over the past five years was an average of 9.3% per year, compared to 8.7% for the ASX 200 Accumulation Index, including franking.

Despite that outperformance, at the end of June 2024, the AFIC share price was trading at the biggest discount to the net tangible assets (NTA) of the past decade. That might imply there's a bargain here.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended CSL, Goodman Group, Macquarie Group, Transurban Group, and Wesfarmers. The Motley Fool Australia has positions in and has recommended Macquarie Group, Telstra Group, and Wesfarmers. The Motley Fool Australia has recommended CSL, Car Group, and Goodman Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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