Do You Think You Know How to Diversify & Spread your Eggs into Different Baskets?

John and Mary recently inherited a large sum of money. They decided to invest in eight different rental properties all in joint names. In regard to this investment decision, are they diversified and well spread?

The answer would be no. The properties might be in eight different locations close to them but they are now more heavily exposed to the rental and residential property market with limited exposure to the other possible areas of property e.g. retail property, commercial property and industrial property. They would be better off with wider exposure to other sector markets and tax treatments such as international investment, Australian shares, fixed interest and cash. Now under what ownership and where should these additional investments have been held to maximise their tax position? Everything is now in joint names and whenever one of them sells, the other one will have to live with the tax consequences whether they like it or not. The situation could be altered and ‘fixed’ but at additional unnecessary cost, had they sought advice BEFORE they bought!