How much of your portfolio should be in Aussie shares versus global ones?

It’s a valid question, with no single answer that works for everyone. The right mix depends on several factors: your goals. Your risk appetite. The role each investment plays in your overall portfolio. Even your preferences around income and exposure to international companies.

We’ll chat about that more in this article. Rather than tell you what your split should be, we’ll walk through some of the key considerations. We'll also explore the factors that may influence how you allocate between Australian and global shares in your portfolio.

What is ‘home bias’ and why is it common?

Home bias is the tendency to invest more in your own country’s shares than in international ones. For many Australians, a large portion of their share portfolio sits in the Australian Securities Exchange (ASX) . There are a few reasons why local investors often lean this way.

One is familiarity. People may feel more comfortable investing in companies they’ve heard of or interact with day-to-day. The rules, systems and tax structures can also be easier to follow at home.

Another is franking credits . These are tax credits that can reduce the tax you pay on dividends from Australian companies. That makes income from local shares more appealing for some.

Currency is also part of the picture. Investing overseas can mean exposure to foreign currencies, which can rise or fall compared to the Australian dollar. That adds an extra layer of movement (and sometimes, uncertainty) to investment returns.

Australians aren’t alone in this. Studies have shown that investors in most countries tend to favour their local markets , even when global options are available.

How big is Australia in the global market?

Australia makes up around 2% of the global share market. That figure comes from global indexes like the MSCI World Index, which track developed markets.

By comparison, the United States represents around 60% of the index. Other large contributors include Japan, the UK, and European countries. Even smaller developed markets like Canada have a larger share than Australia.

Source: MLC Asset Management

Yet many Australian investors allocate far more than 2% of their portfolios to local shares. In fact, some lean heavily towards the ASX — sometimes 50% or more . That’s a big gap between global market size and portfolio weight.

This isn’t necessarily right or wrong. But it’s something to be aware of when thinking about diversification. A portfolio heavily weighted to one country may miss out on the broader global picture.

Benefits of Australian equities in a portfolio

Australian shares offer several features that may appeal to local investors, some we’ve already touched on. These benefits are part of why many choose to invest close to home.

Franking credits and tax efficiency

As mentioned, many Australian companies pay dividends with franking credits attached. These can reduce the tax paid on dividend income. That’s because the company has already paid tax on its profits. Investors may receive a credit for this, depending on their personal tax situation.

High-dividend sectors

The Australian market is known for its high dividend-paying sectors. For example, banks and mining companies often deliver consistent income to shareholders. Some investors value this focus on cash returns as passive income .

Familiar regulatory and economic environment

Investing in the ASX means dealing with rules and systems you may already be familiar with. Local companies report in Australian dollars and follow local laws and standards, which can make it easier to track and understand your investments.

Liquidity and simplicity

Shares listed on the ASX are generally easy to buy and sell during market hours. You can invest through most brokers with relatively low fees. It’s also easier to manage paperwork and tax reporting for local assets.

These factors can make Australian equities a practical and attractive option for many investors, especially those focused on income or simplicity.

Limitations of a purely Australian equity strategy

Even with its benefits, investing only in Australian shares can limit the range of companies and sectors in your portfolio. That’s important to keep in mind.

Sector concentration

The ASX leans heavily towards banks, miners, and energy companies. These sectors make up a large portion of the index. This means your portfolio may rise and fall with how those industries perform. Other sectors, like technology or healthcare, tend to be underrepresented.

Missing global leaders

Many of the world’s largest and most influential companies are based overseas. Think of global tech firms, pharmaceutical leaders, and industrial giants. A portfolio focused only on Australia won’t include them, which can limit diversification .

Geographic risk

Relying only on the Australian economy adds a layer of concentration risk. If local conditions weaken, your portfolio may feel the impact more directly. International shares can offer exposure to different markets and economic cycles.

None of this means Australian shares are a poor choice. However, a purely domestic strategy may leave some gaps in sectors, geography and global opportunity.

Benefits of global equity exposure

Investing in international shares can open up parts of the market that aren’t well represented in Australia. It can also spread your risk more widely.

Access to global sectors

The global market includes companies in sectors like technology, pharmaceuticals, and global consumer brands. As noted, these industries are currently underrepresented on the ASX. International exposure lets you tap into businesses that lead in innovation, healthcare, and everyday products.

Geographic diversification

Global investing means spreading your money across countries, not just companies. You gain exposure to markets in North America, Europe, Asia, and beyond. This helps reduce reliance on any single economy.

Broader economic exposure

Different countries move through economic cycles at different times. Investing globally can reduce the impact of downturns in the Australian economy alone. You’re also investing in trends shaping other parts of the world.

Access through global ETFs

Some exchange-traded funds (ETFs) give investors exposure to hundreds or even thousands of global companies. Examples include:

• Vanguard MSCI International Shares ETF (VGS) – tracks large and mid-sized companies from developed markets.
• iShares Core MSCI World All Cap ETF (IWLD) – includes a broad range of global companies, including small-caps.
• Betashares Nasdaq 100 ETF (NDQ) – focuses on 100 of the largest non-financial companies listed on the Nasdaq, including global tech leaders.

These ETFs aren't recommendations, but they show the variety of global exposure available to investors in Australia.

Currency risk and global investing

When you invest in global shares, you’re also exposed to foreign currencies. That’s because the companies are based outside Australia. This is known as currency risk .

If the Australian dollar (AUD) falls against another currency, your overseas investments may be worth more in local terms. If the AUD rises, the opposite can happen. Currency changes can add gains or losses on top of the share price itself.

The AUD presently tends to be more volatile than some other currencies. It often moves with global demand for commodities, which can make returns from global shares less predictable.

Some investors choose to use currency hedging to reduce currency movements. These aim to protect your investment from swings in the exchange rate. Others use unhedged investments, which leave currency exposure in place. Neither option is always better; currency risk just adds another layer to consider when deciding how you want to invest globally.

How Australian investors commonly split their allocation

As we've established, Australians like to keep things close to home when it comes to investing. But there’s no single way Australians split their investments between local and global markets. The 2020 ASX Australian Investor Study found that 60% of investors owned domestic shares directly , while only 15% held international shares. This trend has barely shifted in recent years.

Model portfolios and diversified funds offer a range of allocations. For example, Vanguard’s diversified funds provide a mix of Australian and international shares. Their "Balanced" fund allocates roughly 20% to Australian shares and 40% to international shares , with the rest in bonds and cash.

Here are some common splits you might see:

• 70/30: Some investors allocate 70% to Australian shares and 30% to global shares. This is common among those with a strong home bias.
• 50/50: A balanced approach, favoured by some diversified funds and model portfolios, splits investments equally between Australian and global shares.
• 30/70: Some model portfolios, especially those focused on maximum diversification, put more weight on global shares, with only 30% in Australia.

Understanding your options can help you make a choice that suits your needs, without feeling like you have to follow the crowd.

How ETF investors implement a mixed approach

Some investors use ETFs to build a mix of Australian and global shares. It can be a simple, flexible way to diversify. A common approach is to pair an Australian shares ETF with a global shares ETF. For example:

• Vanguard Australian Shares Index ETF (VAS) or Betashares Australia 200 ETF (A200) for local exposure
• Vanguard MSCI International Shares ETF (VGS) or iShares Core MSCI World All Cap ETF (IWLD) for international exposure

This type of pairing gives exposure to both local companies and global markets across North America, Europe, Asia and more.

You might choose your own mix (say 40% local, 60% global) and adjust it over time, or prefer a single fund that blends the two. For example, Vanguard Diversified High Growth ETF (VDHG) includes a built-in allocation across both Australian and global assets.

Both options have trade-offs. Custom blends offer more control, while diversified ETFs offer simplicity and automatic rebalancing. Either way, ETFs can help investors access a broad mix of markets without picking individual shares.

Things to consider when balancing your allocation

There’s no universal rule for how much to allocate to Australian versus global shares. But the following questions might help frame your thinking:

• Are you aiming for income or long-term growth? Australian shares tend to offer higher dividend yields, often with franking credits. Global shares may lean more toward capital growth , especially in sectors like tech and healthcare.
• How much risk are you comfortable with? International investing introduces currency risk and exposure to global market swings. But it may also reduce concentration risk by spreading your investments more widely.
• What’s your time frame? If you’re investing for the long haul, global diversification can help manage market movements across regions. A longer time horizon can potentially make short-term volatility easier to absorb.
• Have you considered the tax differences? As we’ve said, dividends from Australian companies may come with franking credits. In contrast, foreign income may be subject to withholding taxes. These details could influence the overall tax efficiency of your investment mix.
• Is simplicity or customisation more important to you? Some investors prefer a hands-off approach using diversified funds. Others may want to choose their own allocation between Australian and global shares.

While each of these factors may play a different role depending on your circumstances, you can adjust your allocation over time as needs change.

Balance is a spectrum

There’s no perfect split between Australian and global shares. What matters is finding a mix that makes sense for your situation.

Australian equities may offer income, tax benefits, and familiarity. Global equities expand your exposure across countries, sectors, and industries. Each option brings different opportunities and risks. Currency movements, tax treatment, and sector concentration can all shape how returns behave over time.

The aim isn’t to get it exactly right, but to build a portfolio you understand and feel comfortable with over time.