Starter portfolio allocation: how to invest in Australia as a beginner
You don't need 10 ETFs and a spreadsheet. Here are three simple portfolios — 1, 2, or 3 funds — that cover the bases for most Australian investors.
Tip
Before you invest: the checklist
Investing in ETFs is the right move for long-term wealth — but two things come first:
Build a 3-month emergency fund
Before putting money into shares, keep 3 months of living expenses in a high-interest savings account (HISA). ETFs can fall 30–40% in a crash. If you need cash urgently and are forced to sell during a downturn, you crystallise the loss.
Pay off high-interest debt
Credit card debt at 20% is a guaranteed 20% return when you pay it off. No ETF consistently beats that. Pay off all high-interest debt (credit cards, personal loans above 8%) before investing in shares.
The three portfolio options
Option 1 — One fund
100% DHHF (or VDHF)
~8,000 global companies · 0.19% MER · No rebalancing needed
Buy one ETF, set up a regular contribution, and ignore it for 20 years. DHHF automatically holds Australian, US, European, and Asian shares in one fund. This is the right choice for most beginners — complexity is the enemy of consistency.
Option 2 — Two funds
70% VGS
Vanguard global developed markets · 0.18% MER
30% VAS or A200
Australian shares · 0.07%/0.04% MER
The most popular choice among engaged Australian investors. More Australian exposure than a one-fund portfolio (for franking credits), at a lower blended cost (≈0.14% MER). Requires annual rebalancing — sell whichever has grown above its target weight and buy the other.
Option 3 — Three funds
60% VGS
Global developed markets · 0.18% MER
30% VAS
Australian shares · 0.07% MER
10% VAF
Australian bonds (defensive) · 0.20% MER
Adds a 10% bond buffer for slightly smoother returns. Worth considering if you're 5–10 years from drawing down the portfolio. For investors under 40, the bonds typically drag long-term returns enough that they're not worth the complexity.
How much Australian vs international?
Australia is about 2% of the global stock market. Yet most Australian investors hold 25–40% in Australian shares. This "home bias" is rational — not just patriotic:
- Franking credits — Australian dividends come with a 30% tax credit already attached, which reduces your tax bill at lower income levels.
- No currency risk — AUD returns from Australian shares aren't affected by exchange rate movements.
- Higher dividend yield — Australian companies pay out a higher proportion of earnings as dividends (~4–5%) vs global markets (~1.5–2%).
The downside: Australian shares are heavily concentrated in banks and miners — less diversified than global markets. A 20–40% allocation to Australian shares captures the franking benefit without over-concentrating in two sectors.
How to get started in 4 steps
Open a brokerage account
Stake, Pearler, SelfWealth, or CommSec. Choose CHESS-sponsored. Takes 1–2 business days to verify.
Transfer funds
Transfer your initial investment (even $500 is fine) to the brokerage. Add a direct debit for regular contributions.
Place your first buy order
Search for your chosen ETF ticker (e.g. DHHF). Place a market order during ASX hours (10am–4pm AEST). Done.
Automate and ignore
Set up a recurring monthly buy. Use a platform with auto-invest (Pearler) or set a calendar reminder. Then stop checking daily.
Important
Frequently asked questions
What is the best ETF portfolio for a beginner in Australia?
For most Australian beginners, a one-fund portfolio (DHHF or VDHF) is the best starting point. You get instant diversification across thousands of companies globally, automatic rebalancing, and very low fees. If you want more control, a two-fund portfolio of 70% VGS (international) + 30% VAS or A200 (Australian) is equally sound and allows you to customise your home bias.
How much should I invest in Australian vs international shares?
Australia represents about 2% of the global stock market by market capitalisation. Most financial theory suggests matching global weights — but Australian investors often hold more (20–40%) because franking credits from Australian shares provide a genuine tax benefit. A 30% Australian / 70% international split is a common starting point, but anywhere from 20–50% Australian is reasonable.
Do I need bonds in my portfolio as a beginner?
Not necessarily. Bonds reduce volatility but also reduce expected returns. For young investors (under 40) with a long investment horizon, an all-equity portfolio like DHHF typically outperforms mixed portfolios over 20+ years. If you're closer to retirement or know you'd panic-sell in a crash, a small defensive allocation via VDHF (90/10) or VDGR (70/30) may suit you better.
How often should I add to my portfolio?
Monthly is the most practical frequency for most salary earners — it aligns with pay cycles and reduces the cognitive burden of timing. Research shows that investing more frequently (weekly vs monthly) has negligible impact on long-term returns. The most important thing is to invest consistently rather than trying to time the market.
What brokerage should I use to buy ETFs in Australia?
For regular small investments: Stake ($3/ASX trade) or Pearler ($6.50/trade, built for long-term investing). For larger or less frequent trades: SelfWealth ($9.50 flat) or CommSec ($10–$19.95). All are CHESS-sponsored, meaning ETFs are registered in your name. Avoid platforms that use custodian models for ASX ETFs if CHESS sponsorship is important to you.
Should I reinvest dividends?
Yes, for long-term wealth building. When your ETF pays distributions (quarterly), reinvesting them compounds your returns. Some brokers offer Dividend Reinvestment Plans (DRPs) for ETFs. Alternatively, hold distributions in cash and use them for your next purchase — this also lets you rebalance toward your target allocation.