What CBA’s $300 billion milestone says about building wealth

In June 2025, the Commonwealth Bank of Australia (ASX: CBA) hit its latest milestone – a $300 billion market capitalisation. It’s a remarkable statistic for a number of reasons, not least because it now makes CBA’s stock one of the most expensive of its kind in the world.

CBA’s market capitalisation may actually serve better as a teaching moment – one all investors, even those who only hold ETFs, can learn from.

Lesson 1: The price you pay can matter

As legendary credit investor Howard Marks puts it, “It’s not what you buy, it’s what you pay”.

CBA has become the most expensive bank in the world, thanks in large part to a 45% rise in its share price over FY25¹. Australia’s biggest consumer bank has also earned this title due to its lofty price-to-earnings (P/E) and price-to-book (P/B) ratios – both of which are well above those of global retail banking peers like Bank of America and TD Bank.²

These ratios are commonly used by investors to gauge how highly the market is valuing a company. In CBA’s case, the numbers suggest investors are willing to pay a premium.

CBA’s milestone is, therefore, a reminder that buying any asset at stretched valuations, no matter its quality, can limit future returns.

It also reinforces the importance of working on a disciplined investing plan as opposed to chasing any asset at any price. But unless you have the time to value every single asset you want to buy, a more time and cost-efficient approach may be to dollar cost average into an ETF.

Dollar cost averaging means investing a set amount into chosen ETFs on a regular schedule, regardless of what the market is doing. It helps take the emotion out of investing and can be an easy way to stay consistent and grow wealth steadily. Dollar cost averaging into ETFs also helps investors avoid the risk of putting all your eggs into one basket – both in terms of timing and in terms of individual assets.

Lesson 2: Diversification matters – now more than ever

CBA’s milestone may also emphasise the importance of single stock/asset risk in an investor’s portfolio.

Data collated by UBS suggests that CBA is currently worth 11.8% of the entire ASX 200 by itself. This is only the fifth time in the last ~25 years that a single stock has been worth at least 10% of the entire Australian sharemarket³.

It also signifies what a huge potential liability CBA, as a single entity, has become. If its share price were to fall quickly and significantly, the entire local sharemarket would likely come down with it.

This speaks to two things: 1) that single stock risk is very real and that thoughtful diversification is a must for any smart investor and 2) one of the best ways to achieve this goal is through ETFs.

To achieve this, one ETF you could consider is Betashares Australian Quality ETF (ASX: AQLT). Unlike traditional ETFs that weight holdings by market capitalisation, AQLT uses quality metrics. This means you get greater exposure to companies like Wesfarmers and Macquarie Group, and less to BHP and CBA. AQLT also includes high-quality mid and small-cap names such as Pro Medicus, Hub24 and Breville.

By spreading your investment across a range of quality companies, AQLT may help reduce the impact of poor performance from any single stock. It is important to understand, while diversification can help manage risk, it doesn’t guarantee returns or protect against losses.

You can invest in AQLT brokerage free on Betashares Direct.⁴

Lesson 3: The power of distribution reinvestment

There is no question that one reason a lot of investors buy (and in many cases, never sell) CBA is because of its dividend. After all, as of the most recent data available, CBA’s total dividend payout (by size of total dividend) was the sixth-largest in the world⁵.

By reinvesting dividends instead of taking them as cash, investors would have accumulated more shares at various price points. This would have helped them compound their returns and boost long-term wealth.

The same takeaway could also apply to ETFs – regardless of whether it is a broad-market ETF or one with a specific investment goal such as income.

Reinvesting your ETF distribution may help your investment grow steadily over time thanks to the miracle of compounding. Setting up a disciplined dividend reinvestment plan with your ETFs can help quietly and effectively build long-term wealth. In addition, if you want a little flexibility, you can reinvest part of your distribution and receive the remainder of it in cash. But as this article demonstrates, an automated DRP can help enhance the compounding effect that comes with staying invested.

Nuggets of wisdom for every investor

In this piece, we’ve demonstrated that diversification can help manage risk by reducing reliance on any single stock (pending or happening). ETFs can offer exposure to a range of assets and companies, which can help reduce the impact of individual stock movements. Reinvesting distributions can contribute to growth over time through compounding, although returns aren’t guaranteed.

CBA’s recent milestone is a reminder that building wealth isn’t always flashy. However, a consistent, well thought-out long-term investment strategy may help you stay focused during market ups and downs.