Most Australian investors begin by looking at the ASX. It’s familiar territory: the companies are household names, the dividends often come with franking credits and the market reflects industries that play a big role in the local economy.
But once people start thinking about diversification, an interesting reality pops up: Australia makes up only a small slice of the global sharemarket. By market capitalisation, Australian-listed companies represent roughly 2% of the world’s equity market. The other 98% of listed companies are based overseas.
So it’s natural for investors to wonder: if most of the world’s companies are outside Australia, should international shares play a role in an Aussie portfolio?
In this article, we’ll walk through why some investors look beyond the ASX, how international investing works for Australians, and a few common ways people add overseas exposure to their portfolios.
Why some investors go global
There’s a well-known investing behaviour called home bias. It simply means investors tend to favour companies from their own country. In Australia, that often leads to portfolios heavily weighted toward shares listed on the Australian Securities Exchange (ASX) , even though Australia represents only a small part of the global market.
And to be fair, there are good reasons for this. Local companies feel familiar. Investors often recognise the brands, see them in the news or use their services in everyday life. The tax system around franking credits is also relatively straightforward compared with foreign income.
But focusing mainly on one market can mean your portfolio is closely tied to the fortunes of a single country. This is where diversification comes in: spreading investments across industries, asset classes and regions to help manage risk over time. One of the potential benefits of international shares is that it can reduce how closely your portfolio is tied to the Australian economy. When different regions grow at different times, global exposure may help smooth returns over the long term.
Another thing to keep in mind is the make-up of the Australian sharemarket . Financial institutions and resource companies account for a large share of the market. That means banks, miners and energy companies can have a big influence on overall returns. International share markets, on the other hand, include a much wider mix of industries, such as:
- Large technology and software companies such as Apple, Microsoft and Alphabet
- Global healthcare and pharmaceutical firms like Johnson & Johnson, Roche and Pfizer
- Consumer brands operating across multiple regions, including companies like Nike, LVMH and Nestlé
- Semiconductor and advanced chip manufacturers such as NVIDIA , TSMC and ASML
- Electric vehicle and clean energy companies like Tesla and BYD
- Advanced manufacturing, robotics and automation companies such as Siemens and Fanuc
Adding some international exposure can help bring a wider mix of businesses into your portfolio, instead of relying mostly on the sectors that dominate the ASX.
How Australians invest internationally
There are a few different ways Australians typically invest in overseas markets.
ASX-listed international ETFs
One of the most common approaches is using ASX-listed exchange-traded funds (ETFs) that track international sharemarket indices.
An ETF is an investment fund traded on an exchange that aims to mirror the performance of a market index. Examples of market indices include the S&P 500 (tracks 500 large US companies) and MSCI World (tracks large companies across developed markets). By buying a single ETF unit, investors can gain exposure to hundreds – or even thousands – of companies around the world.
Some international ETFs track broad global markets, while others focus on specific regions, countries or sectors.
Because these ETFs trade on the ASX, investors can buy them through their usual broker, like Pearler, in Australian dollars. That usually makes things a bit simpler when it comes to trading, settlement and tax reporting, even though the companies themselves are based overseas.
Direct overseas shares
Some investors prefer buying shares in individual international companies through brokers that offer access to global exchanges such as the NYSE (US), NASDAQ (US), London Stock Exchange (UK) or Tokyo Stock Exchange (Japan). At Pearler, for instance, we let you buy and sell shares from US stock exchanges .
This can give you more targeted exposure to specific businesses. But it also tends to involve more research, currency conversions and record-keeping.
When investing directly overseas, investors usually need to think about foreign exchange when buying and selling shares. Depending on the country involved, there may also be additional tax forms to complete.
Managed funds and listed investment companies
Another option is investing through actively managed global funds or listed investment companies (LICs) that focus on international shares.
These funds pool money from many investors to build a portfolio of global companies. Professional managers decide which businesses to invest in and how the portfolio is spread across different countries and sectors.
Fees can differ from index ETFs, but some investors prefer having an experienced manager making those calls.
Key considerations when investing overseas
While international investing can help broaden diversification, there are a few extra things investors may want to keep in mind.
Currency risk
When you invest in overseas shares, returns are influenced not just by share prices but also by exchange rates.
For example, imagine an investor buys US shares worth 1,000 USD when the exchange rate is 1 AUD = 0.70 USD. If the Australian dollar later weakens to 1 AUD = 0.60 USD, those same US investments become more valuable when converted back into Australian dollars, even if the share price hasn’t changed.
The opposite can also happen. If the Australian dollar strengthens, the value of overseas investments may fall in AUD terms even if the share price overseas is steady or rising.
In short, currency movements can add another layer of ups and downs to international investing.
Some ETFs are currency hedged , meaning they use financial contracts to reduce the impact of exchange rate movements. Others are unhedged, which means currency changes fully affect returns.
Hedging can reduce volatility caused by currency swings, but it can also add costs and doesn’t guarantee better outcomes over every period.
Learn more in our guide to minimising currency risk while investing overseas .
Tax on overseas shares for Australian residents
Australian investors generally need to declare foreign income in their tax returns, including dividends and capital gains from overseas investments.
In some cases, tax may already be deducted before dividends are paid. This is known as a foreign withholding tax on dividends. For example, under current Australia–US tax treaty settings, many Australian investors in US shares or US-based funds see 15% withholding tax applied to certain dividends.
If a US company declares a dividend of 100 USD:
- US withholding tax at 15%: 15 USD
- Dividend received in cash: 85 USD
Even though some tax has already been withheld, investors usually still declare the full 100 USD (converted into AUD) in their Australian tax return.
They may then be able to claim a Foreign Income Tax Offset (FITO) , which helps reduce the risk of the same income being taxed twice.
Another difference compared with Australian shares is that most international dividends don’t come with franking credits , which can affect the after-tax value of dividend income.
This guide to the tax implications of buying US shares in Australia is another helpful starting point.
Costs and administration
Investing internationally can also involve slightly different costs and paperwork compared with buying only Australian shares.
Possible differences include:
- Brokerage and foreign exchange spreads when trading directly on overseas exchanges
- Additional forms, such as W-8BEN, when investing in US markets
- More detailed tax reporting if holding individual foreign shares
For some investors, using international ETFs on the ASX keep things simpler because the fund handles much of this at the portfolio level.
International exposure through superannuation
Many Australians already have international shares in their portfolios – through their super. Super funds commonly invest part of their portfolios in global equities, especially within balanced or growth options.
Where super is concerned, diversified portfolios might include a mix of:
- Australian shares
- International shares
- Property
- Fixed income
- cash
The international share allocation can form a meaningful part of the portfolio’s growth assets.
Before adding global investments outside super, it can be helpful to:
- Check your super fund’s asset allocation
- See what percentage is already invested in international shares
- Note whether the exposure is hedged, unhedged or a mix
Looking at super alongside personal investments can give you a clearer picture of how your overall portfolio is spread across Australian and global markets.
A simple way to think about global investing
When thinking about international shares, many investors don’t start with a fixed percentage in mind. Instead, they work through a few broader questions.
For example, how much of their total portfolio, including super, is already invested overseas?
Another factor is comfort with currency movements. Exchange rates can influence short-term returns, which may add a bit of extra volatility alongside share price movements.
Investors may also think about how they prefer to build portfolios. Some enjoy researching and selecting individual companies , while others prefer broad diversification through index funds or ETFs.
Tax reporting can also play a role. International investments may involve withholding taxes, foreign income tax offsets and a little more paperwork at tax time.
There isn’t a single “correct” split between Australian and international shares. Portfolio decisions usually depend on personal circumstances, investment time horizon and comfort with market fluctuations (AKA risk tolerance ).
Looking beyond ASX-listed Australian shares
Australia’s sharemarket plays an important role in many portfolios, but it represents only a small part of the global economy.
International shares can give investors exposure to companies operating across a wide range of industries, regions and currencies. For many long-term investors, combining Australian and international assets is one way to broaden diversification beyond a single market.
Taking the time to understand how global investments fit alongside your existing holdings, including superannuation, can help you build a clearer picture of how your portfolio sits within the wider global market.
General information disclaimer
This article is for general informational purposes only and does not take into account your objectives, financial situation or needs. Investing involves risk, including the risk of loss. Rules, products and market conditions can change, so consider seeking advice from a licensed professional and checking relevant official sources before making decisions.
