As we discussed earlier today, it has been a period of robust prosperity for ASX shares over the past three years or so.
As of 31 August, the S&P/ASX 200 Index (ASX: XJO) has returned an average of 13.04% per annum over the past three years (including dividends), well above the long-term average of 8.86%.
This has been codified by the bevvy of new all-time highs that the ASX 200 has hit in 2025 to date. The index crossed the 9,000-point threshold for the first time in history back in August and has since climbed as high as 9,054.5 points.
That 13.04% annual return that investors have enjoyed since 2022 is more than enough to build significant wealth if one invests consistently. However, it might surprise some Australian investors to know that the seemingly robust 8% or so that the ASX 200 has delivered in 2025 to date is actually quite modest by international standards.
A report this week alleges that our market's year-to-date return in 2025 puts Australia in 22nd place out of the world's 30 major stock exchanges. That's well behind the likes of South Korea, Hong Kong, China, Canada, Turkey, Japan, the United States, and the United Kingdom, which have all returned well over 10% this year so far. To salvage some patriotic pride, we have bested India, France, Switzerland, and New Zealand.
How can ASX investors benefit from international stock markets?
So what has driven this underperformance compared to other markets around the world? Well, the report quotes Wilson Asset Management's Anna Milne as laying the blame on the Australian market's heavy concentration of "old world industries" like miners and financial stocks:
When there are big world shifting events, such as AI, those are certainly the industries that benefit less. We just haven't seen the valuations of the large caps doubling like some have seen offshore.
John Stavliotis of fund manager Antipodes also cites a weakening US dollar as another reason behind Australia's relative underperformance:
The weakening US dollar is a strong tailwind for emerging market returns, particularly in ASEAN, where these countries are always fighting against capital flight when the dollar is strong and US rates are high.
Indeed, many of the top-performing markets this year so far are emerging markets, including Vietnam, Mexico, Brazil, and Indonesia.
Many ASX investors might envy the returns of these international markets. Fortunately, many are easily accessible on the ASX through exchange-traded funds (ETFs). The US, UK, Japanese, and Korean stock markets all have ETFs available in Australia that investors can easily buy into.
Some examples include the iShares S&P 500 ETF (ASX: IVV), the BetaShares FTSE 100 ETF (ASX: F100), the iShares MSCI Japan ETF (ASX: IJP), and the iShares MSCI South Korea ETF (ASX: IKO).
Remember, past performance is never a guarantee of future success. Even so, the lagging performance of the ASX in 2025 once again highlights how having an internationally diversified portfolio can help boost the returns of ASX investors.
