#10 Don’t overconcentrate your portfolio in bank shares

By Michael O'Neill |  19 October 2018
Banks

Many Australian investors have long been able to sleep comfortably at night owning large holdings in “blue-chip” Australian bank stocks which have delivered high fully franked dividends and share price appreciation over many years. 

While Australian bank shares have done well for investors over the last 10 or 20 years, it appears to us often that many investors have come to associate the safety of having their money invested in a bank (in for example a term deposit) with having a large portion of their share portfolio invested in bank shares. As a result, in addition many Australian investors have taken comfort with their familiarity to the banks’ brands and large sizes – as demonstrated by the Commonwealth Bank’s share register which has in excess of 50% its shares owned by direct retail investors.

This lesson seeks to explain the risks investors should be aware of when owning shares in Australia’s big 4 banks.

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