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AFIC - Through market cycles
AFIC - Through market cycles

AFIC - Through market cycles

Australia is poised to experience its first economic recession in nearly 30 years. As many long-term investors understand, we are heading for another challenging period across most sectors and ensuring the quality of our portfolio is the primary concern.

AFIC has experienced a breadth of economic conditions over its 92-year history and a key factor that stands out among those that have moved through the hard times successfully is a sensible investment philosophy with a focus on long-term performance.

The US stock market famously collapsed in October 1929, and when the dust finally settled three years later it was down 89 per cent from its high. The Australian market also suffered in 1929 and fell a further 28 per cent over 1930.

Many investment funds were wiped out — but not AFIC.

We’ve been guided by and accountable to our core investment principles throughout our history, they have kept us focused and thriving through wars, oil shocks, the 1987 crash, the Dot-Com Bubble

and the Global Financial Crisis, to name a few.

Today, we are the oldest and largest listed investment company (LIC) in Australia because, time and time again we’ve survived many crisis, trusted our principles, and delivered for our shareholders.

We are always accountable to our core principles which we list and detail on our website and form the philosophy of how we approach investing. A point that we have always stood by even in hard times is that AFIC does not seek to trade on business and market cycles, we focus on buying and holding for the long-term which has helped us survive many difficult economic conditions.

This buy and hold mentality not only reduces the cost of trading, but also allows for peace of mind through fragile market conditions as we position ourselves to not only endure downturns but seek opportunities when quality companies are more attractively priced.

We have recently discussed the concept of improving the quality of the portfolio through this climate in our last newsletter, which is another of our core principles. The need for capital has been front of mind for many businesses as they try and operate safely through the business conditions forced by the pandemic, which has provided us opportunities to grow our investment in what we see as higher quality companies with strong fundamentals, good leadership and a sustainable competitive advantage.

Our investment committee is actively involved in the investment process. This introduces the wide-ranging perspectives and the diverse business experience of our directors, investment professionals and the senior management team. In this climate, we need every resource possible to ensure we are fully comprehending and analysing each investment decision we make to secure and grow our shareholders portfolio.

Our principle of looking at gearing through a conservative lens has also benefited the portfolio in challenging climates, including what we are experiencing today. There are times when potential investment returns justify the use of debt by companies, however we stand by the idea that with debt comes a level of risk and servicing that debt may become a concern in hard in difficult times.

Building out an investment strategy with clearly defined investment objectives, supported by a researched and considered investment philosophy, is the key to navigating all market conditions. Having the discipline to stick with your Investment objectives becomes even more important when times are tough.

For AFIC's full list of investment principles, visit the AFIC website at

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