Are Australian investors too loyal?
Australia is 2% of the world's share market. So why does your portfolio look like it's 50%?
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The ASX 200 is pretty much flat year to date and only returned approximately 3% for the financial year of 2026 (the year to 30 June 2026). The ASX 200 placed 16th out of 20 major global indices.
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The ASX 200 finished 16th of 20 major stock indices in FY26 - here's where you should have invested instead
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Past performance is no indication of future performance.
Zooming out to a decade and the pattern continues. Australian shares, including the benefit of franking credits, which flatters the local number still underperforms global peers. Part of the reason is structural, average earnings have grown around 6% per annum, against roughly 11% per annum for the S&P 500. A market whose profits grow roughly half as fast as other countries are always going to struggle, regardless of valuations.
Source: Bloomberg July 2026. Past performance is no indication of future performance
Australia makes up roughly 1.5% of global GDP, and roughly 2% of global equity market capitalisation. So if anything, global markets have already priced in Australia slightly above its economic weight, not below it. It’s not just Australia, either. Lining up the largest weights in the MSCI World index against each country’s GDP rank shows there are greater disconnects across the developed world.
Source: Bloomberg July 2026 & (VIEW LINK)
The imbalance isn’t in how the world values Australia. It’s in how Australians value Australia. As of the December 2025 quarter, APRA regulated super funds, run by investment professionals held 23% of assets in Australian listed shares against 32% in international listed shares.[1] Self managed super funds, where the trustee is the investor rather than a professional manager, ran the opposite way: 26.6% of total assets in Australian listed shares versus roughly 2% in international shares.[2]
If an investor allocates 50% of their portfolio to Australian shares. Just five stocks; the big four banks and BHP can carry roughly the same weight as everything outside Australia and the US combined. Potentially losing more than 46 other markets and over 15,500 other listed companies, offset by only five name.
Source: Bloomberg July 2026
The home bias instinct doesn’t just sit there quietly. It intensifies right after a scare, precisely before the part of the cycle it would have been opportunistic to have international exposure. That’s a systemic, recurring feature of how people respond to volatility abroad, and it’s worth recognising in yourself before the next scare, not after.
After global equities fell in 2022, Australian investors piled harder into domestic ETFs. Inflows rose to $5.3 billion in 2023, up 20%, while international equity ETF inflows fell 15% to $2.2 billion.[3] That reallocation happened right as MSCI World then rallied 34% against the ASX 200’s 13%, shown below
Source: Bloomberg July 2026. Past performance is no indication of future performance
Another example is the GFC. The ASX 200 took almost 12 years to reclaim its November 2007 high. Finally broken only in 2019, around six years longer than it took the US market to recover. A globally diversified investor sitting through that period wasn’t exposed to a single market’s 12 year round trip, they were exposed to whichever markets were recovering fastest, whenever that happened to be.
Source: Bloomberg July 2026
None of this is a case for abandoning Australian shares. It's a case for sizing them deliberately. Using the last ten years actual return numbers, here's what a simple blend would have returned over that period.
Source: Bloomberg July 2026. Past performance is no indication of future performance
Franking credits, currency comfort and familiarity are genuine reasons to keep exposure at home. This isn’t an argument for a global portfolio with 2% in Australia. But a 50%+ home weighting isn’t a measured tilt. It’s a concentrated, undiversified bet that most investors would never choose if they built their portfolio from scratch today, knowing that Australia is 2% of the opportunity set yet carries half the risk. Closing the gap doesn't take a new strategy, just an honest look at what you're already holding.
About ETF Shares
ETF Shares is a low-cost index ETF issuer, based at the Macquarie University Incubator. We specialise in US-focused ETFs, such as the ETFS Magnificent 7+ ETF (ASX: HUGE) and ETFS US Quality ETF (ASX: BEST)
References
1. APRA-regulated superannuation fund asset allocation, December 2025 quarter: ASFA Super Stats, April 2026 edition, compiled from APRA data ((VIEW LINK) landing page: (VIEW LINK)
2. SMSF asset allocation, December 2025 quarter: ATO SMSF quarterly statistical report highlights ((VIEW LINK) domestic/international split via autoSMSF Research ((VIEW LINK)
3. 2022–2023 ETF flow reversal and subsequent rebound: Money Management ((VIEW LINK)
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William Taylor is the Chief Operating Officer at ETF Shares, where he leads the firm's Portfolio Management function. With over a decade of ETF experience, William has a strong track record in managing portfolios across various asset classes and is a CFA charterholder. He began his career in 2011 at Franklin Templeton in London before moving to Schroders to manage institutional mandates. After immigrating to Australia, William joined ETF Securities, where he worked as a Portfolio Manager and eventually served as acting Head of Portfolio Management during his time at the business.
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This article was contributed by a representative of ETFS Shares Management Limited (AFSL No: 562766) and contains information that is general in nature only, and does not take into account your personal objectives, financial situation or needs. Before acting on any information in this article, you should consider the appropriateness of the information, having regard to your own objectives, financial situation and needs, and consider seeking independent financial, legal, tax and other relevant advice. Any investment decision should only be made after obtaining and considering the relevant Product Disclosure Statement (PDS) and Target Market Determination (TMD).
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William Taylor is the Chief Operating Officer at ETF Shares, where he leads the firm's Portfolio Management function. With over a decade of ETF experience, William has a strong track record in managing portfolios across various asset classes and...
Expertise
William Taylor is the Chief Operating Officer at ETF Shares, where he leads the firm's Portfolio Management function. With over a decade of ETF experience, William has a strong track record in managing portfolios across various asset classes and...
Expertise
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