The following chart demonstrates the benefits of international diversification.

On the far left hand side is a portfolio made up entirely of Australian shares. Over a period of 30 years it delivered an annualised return of close to 12 per cent and there were 39 quarters when the portfolio delivered negative returns.

In the middle is a portfolio made up entirely of global shares.

It didn’t perform as well as the Australian portfolio, as it had an annualised return of 9.90 per cent with 43 negative quarters.

The third portfolio on the right-hand side is made up of 50 per cent Australian shares and 50 per cent global shares. Its annualised return was only slightly less than the Australian-only portfolio, but it had significantly fewer negative quarters.

By diversifying across international markets, we can smooth out the volatility of returns by spreading risks, without making a significant impact on the overall result.

 

The Benefits of International Diversification

---

Quarterly: January 1980 - June 2011

<Important: General Information Only
The information contained within this website is of a general nature only. Whilst every care have been taken to ensure the accuracy of the material contained herein at the time of publication neither the author or Licensee will bear responsibility or liability for any action taken by any person, persons or organisation on the purported basis of information contained herein. Without limiting the generality of the foregoing, no person, persons or organisation should invest monies or take action on reliance of the material contained herein but instead should satisfy themselves independently of the appropriateness of such action.