Owning Australian Foundation Investment Co Ltd (ASX: AFI), or AFIC, shares could be a smart move for retirees because they can offer virtually everything an investor in retirement could want.
If you haven't heard of AFIC before, it's a listed investment company (LIC) that largely targets ASX shares for its portfolio.
Its goal is to provide shareholders with attractive investment returns through access to a growing stream of fully-franked dividends, as well as growing the capital value over the medium to long term.
This is not meant to be a short-term investment – AFIC believes the suggested investment period is five to 10 years.
Let's get into why AFIC shares are an appealing pick for retirees.
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Diversification
The LIC can offer investors exposure to a portfolio of businesses, with a weighting towards large businesses. Its top 25 holdings account for 79.5% of the portfolio.
While these companies may not be small, rapidly growing businesses, they can provide stability and strength.
AFIC has been operating for almost a century and has built up a large position in many of Australia's blue-chip stocks. Its total portfolio value is worth around $10 billion, and its blue-chip positions, worth at least 3% of the portfolio at the end of December, include:
- BHP Group Ltd (ASX: BHP) – 9.6% of the portfolio
- Commonwealth Bank of Australia (ASX: CBA) – 8.4%
- National Australia Bank Ltd (ASX: NAB) – 5.1%
- Westpac Banking Corp (ASX: WBC) – 5%
- CSL Ltd (ASX: CSL) – 4.8%
- Macquarie Group Ltd (ASX: MQG) – 4.5%
- Wesfarmers Ltd (ASX: WES) – 4%
- Transurban Group (ASX: TCL) – 3.8%
- Goodman Group (ASX: GMG) – 3.6%
- Telstra Group Ltd (ASX: TLS) – 3.5%
The overall AFIC portfolio is more diversified than the S&P/ASX 300 Index (ASX: XKO) in terms of the spread of sector allocation. There are four sectors that have a double-digit weighting – ASX bank shares (21.1%), ASX mining shares (15.2%), ASX industrials shares (12.3%), and ASX healthcare shares (11.3%).
I'd imagine plenty of retirees have all of their money in just one or a few properties, which isn't very diversified at all. Adding AFIC shares could be very helpful for diversification.
Reliable income
In retirement, I'd like to have a reliable source of dividend cash flow hitting my bank account.
While dividends aren't guaranteed, I think AFIC shares can provide a pleasing source of passive income. There hasn't been one payout cut this century from AFIC, making it one of the most reliable ASX dividend shares around.
The business increased its regular annual payout from 26 cents per share in FY24 to 26.5 cents per share in FY25. That translates into a grossed-up dividend yield of 5.3%, including franking credits.
There are a few businesses on the ASX that have been as reliable as AFIC over the last 25 years, which I think is reassuring for Australian retirees.
A cheap price
I like being able to buy assets for cheaper than they're worth.
Every week, AFIC tells investors how much the business is worth on a per-share basis with the net tangible assets (NTA) figure.
It had a pre-tax NTA per share of $7.89 as of 9 January 2026, which means it's trading at a discount of close to 10%, which I'd call a great bargain right now compared to many other potential investments.
This looks like a good time to invest in AFIC shares, in my view.
