One of the most common questions investors ask today is:
Should I invest more in Australian shares or international shares?
With hundreds of ETFs now available in Australia, it’s never been easier to invest globally. But that choice brings complexity. Deciding how much to allocate to Australian equities versus global equities is one of the most important decisions in building a long-term portfolio.
What are Australian equities?
Australian equities are shares listed on the Australian Securities Exchange (ASX). When people refer to the Australian share market, they’re usually talking about indices like the ASX 200, which represents the largest listed companies in the country.
These companies tend to be concentrated in a few key sectors, particularly banks, mining and large industrial firms. As a result, investing in Australian shares gives you strong exposure to the local economy, but less exposure to sectors like global technology and healthcare.
What are international shares (global equities)?
International shares, also known as global equities, refer to companies listed outside Australia. This includes major US technology companies, European manufacturers and emerging market businesses.
Investing globally allows you to access thousands of companies across different industries and economies. It broadens your opportunity set significantly, particularly in sectors that are underrepresented in Australia.
Australian shares vs international shares: what’s the difference?
The key difference between Australian and international shares comes down to diversification, income and risk.
Australia is a relatively small market, representing only around 2% of global share markets. This means that investing only in Australian equities can leave your portfolio concentrated in a narrow range of industries. By contrast, global equities provide much broader diversification across sectors and regions.
There’s also a difference in how returns are generated. Australian shares tend to deliver higher income through dividends, partly due to franking credits. International shares, on the other hand, tend to offer stronger capital growth, particularly through exposure to high-growth sectors like technology.
From a risk perspective, international investing introduces currency movements, which can increase short-term volatility. However, this can also work in your favour, as currency diversification can help reduce overall portfolio risk over time.
How much should you invest in Australian vs international shares?
This is where many investors get stuck.
If you were to follow global market weights strictly, Australia would only make up a very small portion of your portfolio. But for Australian investors, this approach often isn’t practical.
A portfolio invested entirely in global equities may offer strong long-term growth, but it can also come with higher volatility and a lack of tax-efficient income. On the other hand, a portfolio concentrated only in Australian shares may benefit from dividends and franking credits, but it can lack diversification and miss global growth opportunities.
The more effective approach is to balance these trade-offs.
Research suggests that a split of around 40 – 60% in Australian shares and 40 – 60% in international shares tends to provide a good balance between return and risk.
As a simple rule of thumb, a roughly even allocation between local and global equities is often a sensible starting point.
What is home bias and should you avoid it?
Home bias refers to the tendency for investors to favour their local market.
For Australian investors, this often means holding a larger portion of their portfolio in Australian companies. While this bias can be beneficial to some extent, particularly due to franking credits and familiarity, it can become a problem if it leads to over-concentration.
Too much exposure to Australian equities can increase reliance on a small number of sectors and reduce diversification. A balanced allocation helps ensure you’re not overly dependent on the performance of the local market.
International stock trading vs ETF investing
Some investors consider buying individual international shares directly. While this can offer targeted exposure, it also introduces complexity.
International stock trading typically requires more research, ongoing monitoring and an understanding of different tax rules. It can also increase concentration risk if you’re investing in a small number of companies.
By contrast, investing through ETFs provides broad exposure to global markets in a single investment. This makes it a simpler and more scalable approach for long-term investors, particularly those focused on diversification and consistency.
How Stockspot approaches global vs Australian allocation
At Stockspot, portfolio construction is focused on achieving the best possible balance between return and risk.
Rather than following global market weights strictly, portfolios are designed to include a meaningful allocation to both Australian and international shares. This reflects the practical needs of Australian investors, including income, tax efficiency and diversification.
The result is a structure that aligns with both academic research and real-world investing, while remaining simple and disciplined.
The question of Australian shares vs international shares isn’t about choosing one over the other.
Each plays a different role in a portfolio.
Australian equities provide income and tax advantages, while global equities offer diversification and access to broader growth opportunities. Combining the two allows you to build a more resilient portfolio that can perform across different market conditions.
For most investors, the goal isn’t to pick the “best” market, it’s to build a portfolio that works over the long term.
FAQs
What is the difference between Australian and international shares?
Australian shares are listed on the ASX and provide exposure to the local economy, while international shares offer access to global companies and industries.
Should I invest more in Australian or international shares?
A balanced allocation is typically recommended, often around 40 – 60% in each, depending on your goals.
What is home bias in investing?
Home bias is the tendency to overweight your local market, which can reduce diversification if taken too far.
Is it better to invest globally or locally?
A combination of both is usually more effective, providing diversification, income and long-term growth potential.
What are my options if I want additional exposure to certain markets?
At Stockspot, eligible clients can use our core–satellite approach to add targeted exposure to specific thematic investments. Themes are a smaller portfolio holding weighted to certain sectors or regions, like the U.S or Asia.
If you’re not using an advisor like Stockspot, who automatically rebalances your portfolio to align with your risk tolerance, it’s important to have a clear risk protocol plan and stay disciplined, avoiding the temptation to sell in downturns or chase short-term market trends.
