What’s the best way to get some growth from your investment portfolio? So often we hear people say to buy a few Australian blue chip stocks and hold them long-term. But is that really the best way to get growth from your portfolio?

Now, a “buy and hold” strategy isn’t necessarily bad. In fact, the way people usually obtain wealth is by saving and investing. But that’s another story. Here I’d like to challenge the traditional stockbroking strategy of “buying a few Aussie shares”.

Investors (and their stockbrokers) tend to feel more comfortable investing in shares with which they are familiar. That is, Australian shares that are often household names such as the banks, retailers and mining companies. But people forget that the Australian share market makes up only about 3 per cent of the world’s shares. That’s right … only 3 per cent. Yet they hold all their shares, or growth investments, in the one market — and often in a handful of stocks dominated by a couple of sectors. This represents a highly concentrated investment portfolio with a high level of risk, and it’s a risk that usually goes unrewarded.

So what’s the alternative?

A more prudent approach is to make sure your portfolio has exposure to different shares in a variety of markets around the world. This can be done without taking additional risks because you are no longer holding all of your eggs in one basket.

There are some years in which Australian shares perform better than the share markets of many other countries around the world. More often than not however, it helps to have exposure to global shares.

Look at the table. It represents just one year, but it illustrates the fact that limiting one’s investments to a portfolio of Australian shares usually results in sub-optimum returns. Yet where do most Australian’s invest? In Australian shares.

It may also come as a surprise that the seemingly unfamiliar international shares may not be so unfamiliar after all. A global portfolio will often include names such as HSBC, Exxon Mobil, Apple, Coca-Cola, Microsoft, Walt Disney, Volvo and Samsung to name but a few. I’m sure you’ve heard of them. In fact, you’ve probably used some of their products in the past week.

So if you look at your investment portfolio and see nothing but Australian company names, perhaps it’s time to enhance your investments by broadening your exposure to the globalised world we now live in. Chances are it will pay off.

Written for  The Sydney Morning Herald.