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Australian Share Market Facts

The Australian sharemarket is one of the largest in the world, as measured by the total number of individual shares (2,000+) and value of all the shares on the market ($US1.5 trillion as of 2017). 

It's Concentrated

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The Australian sharemarket is very concentrated. That means, the top few companies account for the majority of the sharemarket's worth. 

For example, in 2017, the top 5% of companies (around 97 in total) account for over 80% of value and share turnover! The top 10 companies, mostly from the banking and resources sectors, account for 39% of the value.

ETF Market Growing... Fast!

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In 2016, the total value of ETF trading on the Australian sharemarket stood at $15.46 billion. In 2017, it was $17.29 billion.

While studies vary, we're inclined to believe between 15% and 20% of all share trading in Australia throughout 2018 was conducted by index funds and ETFs

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Australian Share Market Risks

The Australian sharemarket is heavily skewed towards financials (i.e. banks and insurers), resources and property. These companies tend to be 'cyclical', meaning they move in-line with the direction of the broader economy and financial markets.

Some risks to investing in this sector include:

  • Market risk: This is the risk that the performance of the ETF/fund rises or falls unexpectedly day-to-day, month-to-month or even year-to-year. We believe these price movements are unpredictable. Therefore, we believe investing for multiple years is the most prudent way to invest.
  • Home country bias: That happens when you invest a larger amount of your money in local/Australian investments and exclude overseas markets. This may be because it is 'too difficult' or 'too complex' to invest in overseas markets.
  • Concentration: The Australian share market is made up of many companies. However, traditional market indices have a very high proportion of their performance tied to just a few investments, such as blue-chip shares in the financial and resources.
  • Regulatory risk: Australia is a market with a robust financial system. Changes to the rules or laws regarding public investments could alter the performance of ETFs and funds in the sector.

Complete list of ASX ETFs