An investment portfolio is the collection of all your investments — shares, ETFs, bonds, property trusts, cash — held together to work toward your financial goals. Building a portfolio is not about picking the hottest stocks; it is about designing a collection of assets that works for your time horizon, risk tolerance, and goals. For most Australians, a simple two or three ETF portfolio covers everything needed.
Step 1 — Define Your Goals and Time Horizon
Before choosing any investments, establish what you are investing for and how long you have:
| Goal | Typical time horizon | Risk capacity |
|---|---|---|
| House deposit | 1–4 years | Low |
| Education fund | 10–15 years | Moderate |
| Long-term wealth building | 15–30 years | High |
| Retirement income | Ongoing | Moderate (in retirement) |
The longer your time horizon, the more short-term volatility you can afford — and the higher the proportion of growth assets (shares) that is typically appropriate.
Step 2 — Decide on Asset Allocation
Asset allocation is the most important portfolio decision — how you split your money between growth assets (shares, property) and defensive assets (bonds, cash).
A common rule of thumb: Subtract your age from 110 to get an approximate shares allocation.
- Age 30: ~80% shares, ~20% defensive
- Age 45: ~65% shares, ~35% defensive
- Age 60: ~50% shares, ~50% defensive
This is a rough guide only — your personal situation, goals, and risk tolerance should drive the actual allocation.
Step 3 — Choose a Simple Portfolio Structure
Most Australian retail investors are well served by one of these simple structures:
Option 1 — One ETF (Simplest)
Hold a single diversified all-in-one ETF:
| ETF | Allocation | MER |
|---|---|---|
| DHHF (Betashares Diversified All Growth) | 100% global shares | 0.19% |
| VDHG (Vanguard Diversified High Growth) | 90% shares, 10% bonds | 0.27% |
DHHF and VDHG are internally diversified across Australian shares, international shares, and (in VDHG’s case) some bonds. No rebalancing required.
Option 2 — Two ETFs (More Control)
| ETF | Allocation | Purpose |
|---|---|---|
| VAS or A200 | 30% | Australian shares |
| VGS | 70% | International developed markets |
This gives control over the Australian/international split and allows you to adjust over time. Requires annual rebalancing.
Option 3 — Three ETFs (Defensive Option)
| ETF | Allocation | Purpose |
|---|---|---|
| VAS or A200 | 30% | Australian shares |
| VGS | 50% | International developed markets |
| VAF or AGG | 20% | Bonds (defensive) |
Adds a bond allocation for lower volatility. Suitable for investors with a shorter time horizon or lower risk tolerance.
Step 4 — Choose Where to Hold Your Portfolio
| Account type | Tax treatment | Access |
|---|---|---|
| Brokerage account (individual/joint) | Marginal tax rate on income; CGT on gains | Anytime |
| Company structure | 30% corporate tax rate | Anytime (but complex) |
| Trust structure | Distributed to beneficiaries | Anytime (complex) |
| Superannuation | 15% tax on contributions and earnings | From age 60 |
For most beginners, a standard individual brokerage account is the right starting point. Super is maximally tax-efficient but inaccessible until age 60.
Step 5 — Choose a Broker
Popular Australian brokers for ETF investing:
| Broker | Brokerage per ETF trade | Best for |
|---|---|---|
| Superhero | $0 | Beginners, small regular contributions |
| Pearler | $6.50 | Automated long-term DCA investing |
| SelfWealth | $9.50 flat | Active traders and larger portfolios |
| CommSec | $10–$19.95 | Bank-backed security preference |
Step 6 — Make Your First Purchase and Invest Regularly
Buy your chosen ETF(s) and set up a regular investment schedule. Dollar cost averaging — investing a fixed amount monthly — is the most practical approach for most Australians who invest from income.
Step 7 — Rebalance Annually
If you hold multiple ETFs, their relative values will drift over time as different assets grow at different rates. An annual rebalance — selling a little of what has grown most, buying more of what has grown least — keeps your allocation on track.
With a single all-in-one ETF like DHHF or VDHG, this is done for you automatically.
Portfolio Construction Principles
- Start simple — complexity rarely improves outcomes for retail investors
- Keep costs low — every dollar in fees is a dollar not compounding for you
- Diversify broadly — hundreds of companies across multiple countries
- Stay the course — the biggest risk is selling during downturns
- Increase contributions over time — as income grows, so should investment amounts
Related Articles
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- Dollar Cost Averaging Australia
- 3-Fund Portfolio Australia
- Getting Started hub
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Frequently Asked Questions
How many ETFs do I need in my portfolio? One to three well-chosen ETFs is sufficient for most Australian retail investors. DHHF or VDHG in a single fund provides exposure to thousands of companies globally. Adding more ETFs beyond three rarely adds meaningful diversification benefit and increases complexity.
Should I include international shares in my portfolio? Yes. The Australian market (ASX 200) represents approximately 2% of global market capitalisation. Limiting your portfolio to Australian shares concentrates you heavily in mining, banking, and resources sectors. International diversification through ETFs like VGS reduces this concentration.
When should I sell investments from my portfolio? Ideally, you sell when you reach a goal — not when markets fall. The most common expensive mistake is selling during market downturns, which converts temporary paper losses into permanent real losses. Plan your sell strategy before you invest (e.g., “I will sell when I reach $500,000 for my house deposit” or “I will draw down 4% per year in retirement”).
This article provides general financial information only. For advice tailored to your situation, speak with a licensed financial adviser. You can find one through the ASIC financial advisers register or MoneySmart.