As the Australian sharemarket has one of its worst starts to a year on record, it is worth pointing out that Australian shares are world-beating investments.
Returns, including dividends, from Australian shares from 1900 to 2014 were the third-highest in the 20 countries measured by Morningstar.
Australian shares produced an average annual return of 8.94 per cent over the period, with only Finland and South Africa doing better.
The Australian performance is even more impressive because it is "real" returns; the returns after inflation.
And it gets better. To achieve those high returns Australian investors took much less risk than investors in other high-returning sharemarkets.
For example, Finnish investors endured much greater volatility to earn an annual average return of 9.26 per cent, or only 0.32 percentage points more than Australian investors. Ditto for South Africans.
There is a danger the terrific returns have created a culture of complacency among Australian investors that the current bout of volatility in the local market is unlikely to dent.
The world's most famous investor, Warren Buffett, once said: "There's no way you can bet against America and win."
Over the long term the same can be said of Australia.
However, most investors, particularly those with their own super funds could do with a bit more exposure to overseas shares.
While DIY super fund trustees are diversifying overseas by using low-cost exchange traded funds, their portfolios retain a strong home bias.
Statistics on DIY super funds from the Tax Office show in 2015 about 32 per cent was in Australian shares, 27 per cent in cash term deposits and15 per cent in property, including residential and non residential.
It shows DIY funds having exposure to overseas shares of less than 0.5 per cent.
As has been pointed out, the data is misleading. Among the categories listed is "listed trusts and "other managed investments". These vehicles can invest in global shares.
Adding these to global shares that are held directly by DIY funds puts their exposure to global shares at between 5 and 10 per cent.
Nevertheless, it should be higher. The Australian sharemarket represents only 2 per cent of global markets.
Investment opportunities in Australia are restricted with the Australian market highly concentrated to financials, real estate and materials.
As Morningstar points out, "defensive" sectors of consumer staples, utilities, and healthcare are not that well represented on the domestic market.
"Adding defensive stocks reduces cyclical bias and has the benefit of cushioning returns in down markets," Morningstar says.
Those without their own super fund are usually with their employers' default fund, which will be a balanced portfolio.
Morningstar's report confirms balanced investment portfolios are most likely the best option for Australians when considering all the trade-offs around retirement income.
DIY fund trustees should note that large super funds, on the advice of their asset consultants, have balanced options with about 30 per cent in Australian shares and about 20 per cent in international shares.
It is the best trade-off between risk and return for the majority of members.
Twitter: @jcollett_money
