Which bank?

It’s likely every Australian share portfolio will hold at least one of Australian bank. But picking the right bank is difficult. You can see below, over the last five calendar years three of the “big four” banks have been the best performer at least once. Only picking one bank is called stock pick risk. You’re betting on just one stock.



Source: Factset, as at 31 December 2019; Total Return, calendar year returns ending December.

Prudent investors look to diversify within and across asset classes. A portfolio that includes all the banks reduces stock pick risk.

The MVIS Australia Banks Index tracks the performance of the largest and most liquid banks with exposure to any single bank capped at 20%. The table below provides a breakdown of the MVIS Australia Banks Index at its most recent re-balance in June this year. The index includes the most liquid Australia banks with exposure to any single bank capped at 20%.

Name	Weight (Capped)
COMMONWEALTH BANK OF AUSTRALIA	20.00%
WESTPAC BANKING CORP	20.00%
NATIONAL AUSTRALIA BANK LTD	20.00%
AUST AND NZ BANKING GROUP	20.00%
MACQUARIE GROUP LTD	16.95%
BENDIGO AND ADELAIDE BANK	1.65%
BANK OF QUEENSLAND LTD	1.40%

Investing in an ETF which tracks the MVIS Australia Banks Index reduces stock pick risk and takes the guess work out of determining which bank is going to perform best by providing you with exposure to the entire Australian banking sector.