Australian shares and investing in the domestic stock market

Australian shares are shares in companies that are based in Australia. These stocks may be easier to research because you're more familiar with the companies and the local market. Investing in Australian shares may also be easier to analyse as they generally carry less direct risk from geopolitical issues linked with foreign governments or swings in foreign currency exchange markets.

As such, investing in Australian shares is a common strategy for many local investors, as well as first-time or new investors. When you purchase shares, you acquire a portion of ownership in a company. As a shareholder, you may have the right to vote at shareholder meetings and receive dividends, which are a share of the company’s profits distributed to shareholders.

Shares of publicly listed companies are traded on stock exchanges, such as the Australian Securities Exchange (ASX), through brokers like Westpac Share Trading. The value of a share can fluctuate based on various factors, including the company's current earnings and future financial prospects.

The ASX is split into 11 main sectors which include: materials, financials, health care, energy, industrials, consumer discretionary, consumer staples, information technology, utilities, real estate and communication services. Some examples of Australian shares include Westpac, BHP, CSL, Woolworths and Telstra.

^{Source: May 2025, https://www.marketindex.com.au/asx-sectors}

How Australian shares can work for you

• Capital gains: This is the profit you make if you sell your shares for more than you originally paid. This is an important factor to consider when setting up your investment strategy.
• Dividends: Australian shares are known for having a higher dividend yield than foreign markets, especially among larger companies such as banks, mines and utilities. This could be important if you are following an income investing strategy.
• Liquidity: The top 200 companies* on the ASX are some of the most liquid stocks globally, which means they can be bought or sold quickly and easily.
• Tax benefits: If you invest in listed shares and hold them for over 12 months, you may be eligible for a Capital Gains Tax (CGT) discount. Franking credits are another tax benefit which allows investors to receive a tax credit on dividends paid by companies that have already paid corporate tax. You should consider obtaining your own independent taxation advice prior to investing.

Before  investing in Australian shares, it is important to understand the risks involved. You should conduct appropriate research or consider obtaining an independent advice from a professional before making a decision.

Key risks of investing in Australian shares

• Capital loss: Like with any market, capital loss occurs when you sell a share for less than you originally paid. For instance, if a company is performing poorly, the demand for shares in that company may fall resulting in the price going down. If you sell for a lower price than you bought, you may experience some losses.
• Volatility: Share market volatility refers to how quickly share prices can rise and fall. When investing in shares, you need to be aware of the risk of stock price fluctuations.
• Sector concentration risk: The Australian market is heavily weighted towards the materials and financial sectors, that is, mining companies and the big banks. A downturn on one of these sectors could disproportionately impact the entire market.