7 reasons why the ASX should be part of your investing portfolio

Diversifying your investment portfolio is key to getting a leg up in the investment scene and padding your wealth.

There are countless investing methods that a keen individual can consider to grow the figure in your bank account, and one such way is by investing in the Australian Stock Exchange, or the ASX for short.

The Australian economy boasts a solid foundation for investors to grow their wealth, regardless of whether they’re based in Australia or overseas.

With a robust economy, strong regulatory policies, and a wide range of growing and developed sectors, the Australian Stock Exchange presents investors with a valid means of unlocking long-term gains.

If you’re still at the crossroads on whether or not to invest in the Australian market, you’ve come to the right place. In this article, we’ll unveil several reasons why you should add some Australian stocks (or the ASX itself) to your broader investment portfolio.

Let’s take a look at seven of these perks in greater detail.

1. Australia Has a Stable Economy

Australia is known to have one of the world’s strongest economies, showing great resiliency and growth that has persisted for decades. It not only has an already solid economic foundation with a top-level GDP, but it also continues to show promising growth for the next five years, showing similar trend levels with the United States.

Furthermore, Australia’s economic stability is also supported by its stable sociopolitical and geopolitical sphere. There’s no risk of war, famine, civil unrest, or any epidemic happening within the borders of Australia in the foreseeable future, which makes it an attractive and solid option for investors to consider investing in for their long-term wealth.

These conditions position the country (and its underlying economy) as one of the top countries to invest in, as its historic and projected growth levels show a high likelihood of consistent returns should an investor place a stake in their economy.

2. Australia Has Global Renown

Australia holds a respected position in the international space, being a valued exporter for various resources like fuel, dairy, and mining equipment to a multitude of countries.

Considering its reputation as a trading partner, investing in Australia’s stock exchange is a good way to capitalise on this global demand.

This is because the global demand for Australian goods and services is directly reflected in the price of ASX, and as long as there’s interest in these items, growth in this particular market holding is inevitable.

Furthermore, a lot of Australian services like banking services also have special utility in other countries, enabling Australians and people of other nationalities to use their services even if they’re not in their home country.

The continued usage of these services abroad can inspire investor confidence, thereby furthering the growth of Australia’s stock exchange price and the price of other stocks within that market, such as the CBA share price for banking services.

3. Attractive Dividend Yields

The Australian Stock Exchange market has a wide range of stocks that provide dividend-earning opportunities for investors, making it an attractive passive investment option for this class of individuals.

Typically, many of these stock options pay out dividends semi-annually and annually, as an interim dividend and a final dividend. This constant and consistent payout can be a great way for investors to get substantial returns from their investment reliably and without delay.

Furthermore, a lot of these dividend yields offer better rates than other market rates, such as the S&P500’s average stock dividend yield of about 3% per annum. In comparison, many ASX stocks offer dividend yields of 4 to 5% per annum.

As such, if you want to invest in a market with a flourishing dividend return, consider investing in the ASX.

4. Franking Benefits

If you’re an Australian citizen, you can also enjoy franking credits from investments made on the Australian stock exchange market.

These credits eliminate the double tax phenomenon, reducing your overall tax obligations as additional tax is already paid by the publicly listed company and recognised by the tax office. This is often the case with reputed blue-chip companies like CBA and BHP.

Due to this phenomenon, Australian citizens can get more bang for their buck when investing in the local market. Furthermore, investors in lower tax brackets can also receive a refund from the Australian Taxation Office (ATO) for franking credits.

This makes the ASX and its underlying individual stocks a compelling option for growing your income and getting more from each return.

5. Access to Diverse Sectors

With a total market cap exceeding $2 trillion, the ASX is a highly mature and developed market that can be a great alternative to the standard S&P500 and other well-known markets.

With its size comes a wide range of sectors. This includes retail, mining, finances, healthcare, technology, banking, farming and agriculture, real estate, and renewable energy.

All of these sectors have key players that contribute to Australia’s emerging and growing economy. In particular, the mining and healthcare sectors in Australia are soaring, experiencing growth that’s predicted to trend upward for years to come.

If you want your portfolio to include players in emerging and mature industries, then the Australian market and stock exchange can fit that role exceptionally well.

6. Regulated Market

Another perk of investing in the Australian Stock Exchange is the reliability and legitimacy of this market.

Unlike volatile asset classes like cryptocurrency, there are stringent regulations in place in the ASX that uphold the protection of investors and their finances.

These regulations are enforced by the Australian Securities and Investments Commission (ASIC). This department oversees all operating public companies in Australia and ensures that they’re in compliance with transparency and regulatory standards.

With these enforcements, investors can have peace of mind that their investments won’t be at risk of scams and fraudulent activities. This grants every type of investor, regardless of their risk tolerance, peace of mind knowing that their investments are in government-backed assets.

7. Low Barrier to Entry

Lastly, with the diverse range of asset classes listed in the ASX, there’s bound to be a stock option that fits your individual investor profile—regardless of your financial circumstances, risk profile, and long-term financial goals.

If you’re working with limited capital but still want to invest and reap profits, that’s certainly a possibility with the ASX.

As long as you’re over 18 and have the financial means to invest, then you can start investing by opening a brokerage account, depositing some money into an asset class, and waiting until you get a sizeable profit before exiting your position.

Granted, the road to profiting from the stock market isn’t going to be a smooth ride. You’ll need to do some research and align it with your goals to fully reap the benefits of the investment.

But by being an educated and informed investor, you’ll increase your chances of reaping a profit from your ASX investment. And if you’re an Aussie, then starting with local stocks is a great way to get started.