Index killer? Here’s how AFIC (ASX:AFI) shares stack up to the ASX 200

How does AFIC measure up to the ASX 200?
The post Index killer? Here’s how AFIC (ASX:AFI) shares stack up to the ASX 200 appeared first on The Motley Fool Australia. –

Much has been made of the rise of the exchange-traded fund (ETF) over 2021 thus far. Especially since this year has seen the ASX ETF sector swell to a record size in terms of funds under management (FUM). But it wasn’t that long ago that there was no such thing as an ASX ETF. Yes, the first ASX ETF only launched in 2001. So what did investors who wanted broad, diversified market exposure do before that? Well, one solution was investing in Listed Investment Companies (LICs) like the Australian Foundation Investment Co. Ltd (ASX: AFI).

ETFs and LICs

LICs were about the closest thing to an ETF you could get before there were actual ETFs. A LIC is a company and not a trust, as an ETF is. But it still invests in other underlying shares for the benefit of its shareholders, as an ETF does. AFIC is one of the oldest LICs on the ASX, having first opened its doors way back in 1928, a good ten years or so before the onset of the Second World War.

But nowadays, investors wanting broad diversification in a single company or fund are spoilt for choice. And many investors would rather just own the market and get the market’s return through an ETF rather than trying their luck with a LIC.

But is this attitude a good one to have? Let’s check out how AFIC shares have performed against the S&P/ASX 200 Index (ASX: XJO) over the past 6 months. We’ll use the iShares Core S&P/ASX 200 ETF (ASX: IOZ) as a benchmark, since it is the most popular ASX ETF covering the ASX 200 Index.

So IOZ units have returned approximately 3.28% over the past 6 months, including dividend distributions. How does AFIC compare?

Well, the AFIC share price alone is up 8.95% over the same period, including the 1.2% jump we see today. Including the 14 cents per share final dividend investors received in August, and we get a return of more than 10%.

So AFIC has clearly trounced the ASX 200 over the past 6 months.

How do AFIC shares measure up to the ASX 200?

But let’s zoom out. Over the past year, the ASX 200 ETF has returned roughly 15.36%, including dividend distributions. AFIC, in contrast, has delivered a 19.5% return over the same period, also including dividends.

Over five years, IOZ units have averaged an annual return of 9.96%. AFIC again bests it with a 13.8% average.

So how has AFIC managed to outperform its own index so consistently? Well, by not holding the same shares in the same proportions as the index. For example, AFIC tells us that its top 5 holdings as of 30 November were:

Commonwealth Bank of Australia (ASX: CBA) with an 8% portfolio weighting

CSL Limited (ASX: CLS) with a 7.3% weighting

BHP Group Ltd (ASX: BHP) with a 6% weighting

Macquarie Group Ltd (ASX: MQG) with a 4.7% weighting

Wesfarmers Ltd (ASX: WES) with a 4.6% weighting

In contrast, here are the current top five holdings and their weightings in the ASX 200:

Commonwealth Bank with an 8.05% weighting
CSL with a 6.2% weighting
BHP with a 5.83% weighting

National Australia Bank Ltd. (ASX: NAB) with a 4.47% weighting

Westpac Banking Corp (ASX: WBC) with a 3.66% weighting

So as you can see, these two portfolios do differ quite significantly, with AFIC clearly giving the big four ASX 200 bank shares a wider berth than the index itself.

This differentiation from the index has evidently worked in AFIC favour over the last few years. But who knows what the next few hold.

At the current AFIC share price of $8.41, this ASX LIC has a market capitalisation of $10.31 billion, with a dividend yield of 2.85%.

The post Index killer? Here’s how AFIC (ASX:AFI) shares stack up to the ASX 200 appeared first on The Motley Fool Australia.

Should you invest $1,000 in AFIC right now?

Before you consider AFIC, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and AFIC wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

More reading

ASX 200 (ASX:XJO) midday update: Medibank and NIB rise, Bega sinks

Are these 2 strong ASX 200 shares buys?

5 things to watch on the ASX 200 on Thursday

Here are the top 10 ASX shares today

These 3 ASX 200 shares are topping the volume charts on Wednesday

Motley Fool contributor Sebastian Bowen owns National Australia Bank Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended CSL Ltd. The Motley Fool Australia owns and has recommended Wesfarmers Limited. The Motley Fool Australia has recommended Macquarie Group Limited and Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!