July 10, 2025 • 5 mins
Is there a risk to being overinvested in Australian equities?
Join Sean Aylmer & Michael Thompson as they answer questions on business, investing, economics, politics and more.
If you have your own question for Ask Fear & Greed, get in touch via our website, LinkedIn, Instagram or Facebook!
Find out more: https://fearandgreed.com.au
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:03):
Welcome to Ask Fear and Greed, where we answer questions
about business, investing, economics, politics and more. I'm Adam Langan, Hello,
Sean Alma.
Speaker 2 (00:11):
Hello Adam Sean.
Speaker 1 (00:14):
Today's question is a really interesting one, particularly now I
think is there a risk of being overinvested in Australian equities?
Speaker 2 (00:26):
Oh? Absolutely, I mean the huge risk of being So
in a sense, I suppose if you think of it,
what are the risks of being overinvested in Australian equities? Sure,
it's interesting because the IX two hundred, it's had three
financial years of pretty strong returns. So you could say,
well that, you know why not the main reason if
(00:50):
you look elsewhere there's been even better returns. So Wall
Street has done better returns. But let's just take a
step back. Diversification really matters in financial markets now. From
figures there are a couple of years old, about eighteen
months old, it was an AX Australian Investors study that
said that among retail investors, sixty percent of investors held
(01:12):
Australian shares and only sixteen percent held international stocks. That's
more retail. If you go to institutional side, all in
STOs hold international stocks, right, because they're spreading. They're spreading
the risk. And it's really important that when you have
a portfolio of shares, you need to spread the risk.
(01:34):
And by getting buying international stocks then you were spreading,
you were diversifying and therefore spreading the risk. I mean,
we have spoken in the last twenty four hours about
Nvidia hitting four trillion US dollars. Incredible, it's now seven
and a half percent of the S and P five hundred.
If you had gotten onto that in the beginning of
(01:56):
twenty twenty three and you'd put one dollar in video,
it'd now be worth one hundred dollars at this point.
Speaker 1 (02:04):
It's extraordinary.
Speaker 2 (02:05):
Yeah, it is, so you would have missed out big time.
So broadly it's a diversification argument. Now if you'd say, well, okay,
but you know, we're just going to go on an
etre for an Australian market. One of the big problems
with the Australian market it is so dominated by financials.
I mean, I think financial is about thirty two percent
(02:26):
of the market. So that might have stood you in
great steed in the last twelve months when the Commonwealth
Bank was up you know forty five fifty percent and
the other big banks were up kind of twenty percent
or thereabouts. What about this next financial year if you're
just following the ASX two hundred only and the financials
don't do so well. What if the financials and the
miners don't do so well, then you are in all sorts.
(02:50):
So even if you kind of think, well, I just
don't want to spend my money overseas, I just want
to invest locally. The problem with the local market it
is it's just so concentrated. I mean, by SSL you
can buy the big retailers, where's farmers, some of the
tech stocks, But really, if you're just being following the market,
(03:12):
you just overweight financials and Sean.
Speaker 1 (03:16):
I think it's true to say too. I mean, we
love this country, we live here, but in truth it
is not the biggest economy in the world, and thereby
the diversification you can get here is a fraction of
that available worldwide.
Speaker 2 (03:31):
Yeah, I mean exactly right, And institutional investors look at
stocks from all over the world, you know, and I
think retail investors should do that. Now we're not an
investing podcast, so go and get financial advice before you
go and do it. The other thing is a lot
of returns from your super fund, because most we all
(03:52):
have super funds. You talk about returns from that. Most
that's actually about asset allocation as opposed to particular stocks,
and so we always talk about equities here, But if
you're investing in Australia, you can invest in a lot
of things beyond the ASEX two hundred. You can invest
in managed funds that go into private credit. You can
(04:12):
get into managed funds that go into unlisted real assets
like unlisted property, unlisted infrastructure. You can invest in bonds.
As borings a may sound, they are actually a great
diversification play for your portfolio. So there's a big risk
in only investing in the ASEX two hundred and one.
(04:33):
If you're in equities investor only, you're missing out potentially
on a lot of other potent companies like Nvidia that
have done really well, and you need to diversify your portfolio.
And the second part is if you think about asset allocation,
maybe it shouldn't just be equities. Maybe it should be
bonds and alternates and those sorts of things. Now again
I stress we are not an investment podcasts. Go and
(04:55):
speak to a financial advisor about what you want to.
Speaker 1 (04:58):
Do, Sean, You've got an express. The trend is your friend.
Can I can I propose an addendum to it?
Speaker 2 (05:05):
Please? Please?
Speaker 1 (05:06):
The trend is your friend, but diversification is family.
Speaker 2 (05:12):
Well, I mean I like it, but it doesn't sort
of flow. Trend is your friend. Diverse think diverse is
anti perverse because diverse is actually good. I don't know,
work in progress on that one.
Speaker 1 (05:27):
Thank you very much, Sean.
Speaker 2 (05:28):
Thanks Adam.
Speaker 1 (05:29):
If you have your own question for fear and Greed,
jump onto the website Fearinggreed dot com dot au or
send it through on any of the social media platforms.
I'm Adam Lang, and this is ask Fear and Greed
Welcome to Ask Fear and Greed, where we answer questions
about business, investing, economics, politics and more. I'm Adam Langan, Hello,
Sean Alma.
Speaker 2 (00:11):
Hello Adam Sean.
Speaker 1 (00:14):
Today's question is a really interesting one, particularly now I
think is there a risk of being overinvested in Australian equities?
Speaker 2 (00:26):
Oh? Absolutely, I mean the huge risk of being So
in a sense, I suppose if you think of it,
what are the risks of being overinvested in Australian equities? Sure,
it's interesting because the IX two hundred, it's had three
financial years of pretty strong returns. So you could say,
well that, you know why not the main reason if
(00:50):
you look elsewhere there's been even better returns. So Wall
Street has done better returns. But let's just take a
step back. Diversification really matters in financial markets now. From
figures there are a couple of years old, about eighteen
months old, it was an AX Australian Investors study that
said that among retail investors, sixty percent of investors held
(01:12):
Australian shares and only sixteen percent held international stocks. That's
more retail. If you go to institutional side, all in
STOs hold international stocks, right, because they're spreading. They're spreading
the risk. And it's really important that when you have
a portfolio of shares, you need to spread the risk.
(01:34):
And by getting buying international stocks then you were spreading,
you were diversifying and therefore spreading the risk. I mean,
we have spoken in the last twenty four hours about
Nvidia hitting four trillion US dollars. Incredible, it's now seven
and a half percent of the S and P five hundred.
If you had gotten onto that in the beginning of
(01:56):
twenty twenty three and you'd put one dollar in video,
it'd now be worth one hundred dollars at this point.
Speaker 1 (02:04):
It's extraordinary.
Speaker 2 (02:05):
Yeah, it is, so you would have missed out big time.
So broadly it's a diversification argument. Now if you'd say, well, okay,
but you know, we're just going to go on an
etre for an Australian market. One of the big problems
with the Australian market it is so dominated by financials.
I mean, I think financial is about thirty two percent
(02:26):
of the market. So that might have stood you in
great steed in the last twelve months when the Commonwealth
Bank was up you know forty five fifty percent and
the other big banks were up kind of twenty percent
or thereabouts. What about this next financial year if you're
just following the ASX two hundred only and the financials
don't do so well. What if the financials and the
miners don't do so well, then you are in all sorts.
(02:50):
So even if you kind of think, well, I just
don't want to spend my money overseas, I just want
to invest locally. The problem with the local market it
is it's just so concentrated. I mean, by SSL you
can buy the big retailers, where's farmers, some of the
tech stocks, But really, if you're just being following the market,
(03:12):
you just overweight financials and Sean.
Speaker 1 (03:16):
I think it's true to say too. I mean, we
love this country, we live here, but in truth it
is not the biggest economy in the world, and thereby
the diversification you can get here is a fraction of
that available worldwide.
Speaker 2 (03:31):
Yeah, I mean exactly right, And institutional investors look at
stocks from all over the world, you know, and I
think retail investors should do that. Now we're not an
investing podcast, so go and get financial advice before you
go and do it. The other thing is a lot
of returns from your super fund, because most we all
(03:52):
have super funds. You talk about returns from that. Most
that's actually about asset allocation as opposed to particular stocks,
and so we always talk about equities here, But if
you're investing in Australia, you can invest in a lot
of things beyond the ASEX two hundred. You can invest
in managed funds that go into private credit. You can
(04:12):
get into managed funds that go into unlisted real assets
like unlisted property, unlisted infrastructure. You can invest in bonds.
As borings a may sound, they are actually a great
diversification play for your portfolio. So there's a big risk
in only investing in the ASEX two hundred and one.
(04:33):
If you're in equities investor only, you're missing out potentially
on a lot of other potent companies like Nvidia that
have done really well, and you need to diversify your portfolio.
And the second part is if you think about asset allocation,
maybe it shouldn't just be equities. Maybe it should be
bonds and alternates and those sorts of things. Now again
I stress we are not an investment podcasts. Go and
(04:55):
speak to a financial advisor about what you want to.
Speaker 1 (04:58):
Do, Sean, You've got an express. The trend is your friend.
Can I can I propose an addendum to it?
Speaker 2 (05:05):
Please? Please?
Speaker 1 (05:06):
The trend is your friend, but diversification is family.
Speaker 2 (05:12):
Well, I mean I like it, but it doesn't sort
of flow. Trend is your friend. Diverse think diverse is
anti perverse because diverse is actually good. I don't know,
work in progress on that one.
Speaker 1 (05:27):
Thank you very much, Sean.
Speaker 2 (05:28):
Thanks Adam.
Speaker 1 (05:29):
If you have your own question for fear and Greed,
jump onto the website Fearinggreed dot com dot au or
send it through on any of the social media platforms.
I'm Adam Lang, and this is ask Fear and Greed
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
Las Culturistas with Matt Rogers and Bowen Yang
Ding dong! Join your culture consultants, Matt Rogers and Bowen Yang, on an unforgettable journey into the beating heart of CULTURE. Alongside sizzling special guests, they GET INTO the hottest pop-culture moments of the day and the formative cultural experiences that turned them into Culturistas. Produced by the Big Money Players Network and iHeartRadio.