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Why do most diversified Australian portfolios still allocate nearly half of their equity exposure to Australian shares, when Australia represents only around 2% of the global share market?

In this episode, we challenge the traditional 45/55 split between Australian and international equities and examine whether it truly makes sense in today’s global economy.

Campbell breaks down the most common arguments for maintaining a heavy domestic allocation, franking credits, reduced currency risk, higher dividend yields, lower volatility, and familiarity, and tests whether they justify such a significant home bias. While franking credits provide a real and measurable benefit, he explores why that benefit may be meaningful but not transformational. He also unpacks the realities of currency hedging, sector concentration, tax efficiency, and long-term compounding.

Australia’s share market is highly concentrated in banks and miners, with limited exposure to fast-growing sectors like technology. Over the past decade, global markets have outperformed, largely due to stronger earnings growth and broader diversification. Yet over 30 years, returns have been surprisingly similar, which raises a more important question: what does the future likely reward?

Campbell also discusses how the investor stage matters. Retirees seeking income may prefer higher domestic exposure. Accumulators focused on long-term after-tax compounding may benefit from greater global diversification and capital growth orientation.

This episode isn’t about abandoning Australian shares. It’s about thinking more critically about where new investment dollars should go and whether the default allocation most Australians inherit is grounded in evidence, or simply habit.

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