How is AFIC different from an ASX 200 ETF?

We take a look at how a LIC such as AFIC compares to an ASX 200 ETF for passive investors.

| More on:
A woman holds up hands to compare two things with question marks above her hands.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • AFIC is one of the oldest ASX shares on the market
  • This LIC has been a popular choice for passive investment for decades
  • AFIC differs from an ASX 200 ETF in terms of its investment portfolio

The Australian Foundation Investment Co Ltd (ASX: AFI), or AFIC for short, is one of the oldest companies on the ASX. It was founded way back in 1928 as a listed investment company (LIC) and has been doing pretty much the same thing ever since. That would be investing in a portfolio of (mostly) ASX shares on behalf of its investors.

But given this style of passive investing is today dominated by the index exchange-traded fund (ETF), how does AFIC differ? What is the point of investing in a LIC over a simple market ETF?

Well, unlike an ETF, which is duty-bound to exactly mirror the index it tracks, AFIC has portfolio managers that construct the company's investment portfolio as they see fit. This means that AFIC can pick and choose winners from the S&P/ASX 200 Index (ASX: XJO) just like any individual investor. In contrast, an index ETF has to hold all 200 shares of the ASX 200 in the exact same proportions as the index.

This gives AFIC scope to outperform (or underperform) the ASX 200 over time.

How does AFIC's share portfolio compare to an ASX 200 ETF?

Let's check out the data to see this in action. So as it currently stands (as of 8 April anyway), the top five holdings of the iShares Core S&P/ASX 200 ETF (ASX: IOZ) and their weightings are as follows:

  1. BHP Group Ltd (ASX: BHP) with an index weighting of 11.8%
  2. Commonwealth Bank of Australia (ASX: CBA) with a weighting of 8.07%
  3. CSL Limited (ASX: CSL) with a weighting of 5.71%
  4. National Australia Bank Ltd (ASX: NAB) with a weighting of 4.72%
  5. Westpac Banking Corp (ASX: WBC) with a weighting of 3.79%

So let's compare these to AFIC's portfolio. Here are AFIC's current (as of 31 March) top five holdings and their portfolio weightings:

  1. Commonwealth Bank of Australia with a portfolio weighting of 9.2%
  2. BHP with a weighting of 8%
  3. CSL with a weighting of 7%
  4. Macquarie Group Ltd (ASX: MQG) with a weighting of 5%
  5. Transurban Group (ASX: TCL) with a weighting of 4.3%

So even with just those five shares, you can tell these two investments have quite a different composition (albeit with some overlap). That probably explains why AFIC shares have returned an average of 13.2% over the past decade (including dividends and franking). The ASX 200 Index has returned an average of 11.7% (also including divided and franking) over the same period.

Thus, an investment in AFIC is not the same as an investment in an ASX 200 ETF like IOZ. In this case, AFIC investors seem to have done better than index investors over the past decade.

At the current AFIC share price, this ASX LIC has a market capitalisation of $10.16 billion, with a dividend yield of 2.92%.

Should you invest $1,000 in Cochlear Limited right now?

Before you buy Cochlear Limited shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Cochlear Limited wasn't one of them.

The online investing service he’s run for over 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 may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

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 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.

More on ETFs

A woman sits at her desk thinking. She is surrounded by projections of world maps on various screens with data appearing below them.
ETFs

Here's 1 ASX ETF that I'd happily make my entire portfolio

This fund offers both diversification and growth.

Read more »

a business person checks his mobile phone outside a Wall Street office with an American flag and other business people in the background.
ETFs

How to choose a US focused ASX ETF for the current market environment

Here are 5 US focused ASX ETFs to consider.

Read more »

ETF in blue with person's hand in the direction of green and red bars on graph.
ETFs

Bargain hunting: Which ASX ETFs have fallen the most in 2025?

Looking for ETFs that could be undervalued after a rocky 2025? Here are three options to consider.

Read more »

Hand holding Australian dollar (AUD) bills, symbolising ex dividend day. Passive income.
ETFs

Where I'd invest $5,000 in ASX ETFs after the selloff

Let's see which funds could be top picks for an investment right now.

Read more »

A female ASX investor looks through a magnifying glass that enlarges her eye and holds her hand to her face with her mouth open as if looking at something of great interest or surprise.
ETFs

10 ASX ETFs to buy after the Easter break

There's something for everyone with these funds. Let's take a look at them.

Read more »

Woman and man calculating a dividend yield.
ETFs

Trade war heats up: Which ASX ETFs are most exposed to China?

These China-focused funds could be in the firing line.

Read more »

A young man punches the air in delight as he reacts to great news on his mobile phone.
ETFs

3 excellent ASX ETFs to buy before it's too late

Let's see what these top funds offer Aussie investors.

Read more »

Five happy friends on their phones.
ETFs

The best ASX tech ETFs to buy with $3,000

These funds allow investors to buy a slice of some of the best tech stocks in the world.

Read more »