INVESTING: DON’T PUT ALL YOUR EGGS IN ONE BASKET

Investing: Don’t put all your eggs in one basket. That is old advice, but it holds up. For New Zealand investors, it means one thing in particular. Property is a great asset, but it shouldn’t be the only one you own. This guide explains why diversification matters. It covers what else belongs in a well-built portfolio alongside property, and how to think about the trade-off.

30-Second Read

• Diversification means spreading your investments across different asset types, rather than relying on a single one.
• Many New Zealand investors concentrate heavily in property. A well-balanced portfolio often also includes shares, managed funds, PIEs, and sometimes bonds or other assets.
• Putting most of your wealth into one asset class raises your risk, if that specific market underperforms.
• Diversification tends to smooth returns over time. It’s about balance, not certainty — it doesn’t eliminate risk entirely.
• Professional advice helps you build a portfolio that actually matches your goals, risk tolerance, and retirement timeline.

We work through the property concentration problem specifically, what else to consider, a worked example, and a checklist for reviewing your own portfolio.

The Property Concentration Problem

Owning rental investment property can be a genuinely strong way to build wealth. But it’s worth being honest about what concentrating heavily in property actually means for your risk profile. Most of your net worth sitting in one or two properties? A downturn in that specific market — or a specific problem with that specific property — affects a large share of your total wealth at once.

This isn’t a reason to avoid property. It’s a reason to think about what sits alongside it. Weighing up whether property or shares suit you better for your next investment? See our comparison of rental property or shares for how the two stack up directly.

Retirement: Why This Matters Beyond Just Returns

Retirement planning is where concentration risk really shows its teeth. The Retirement Commission (Te Ara Ahunga Ora)(opens in new tab) publishes expenditure guidelines. They give a useful benchmark for what different retirement lifestyles actually cost(opens in new tab) — worth checking against your own plans rather than guessing. A portfolio concentrated in one asset class can be timed badly against a market downturn right as you need to draw on it. That can materially change what retirement actually looks like for you. Spreading your investments across different assets reduces the chance that a single bad year lands exactly when you need the money most.

The Power of Diversification: What Else to Consider

Beyond property, a diversified portfolio typically draws from some combination of:

• Shares and managed funds — direct shareholdings or funds spreading risk across many companies
• PIEs — Portfolio Investment Entities, with their own tax treatment worth understanding before you invest
• Bonds and term deposits — generally lower risk, lower return, useful for balance
• REITs(opens in new tab) — a way to gain property exposure without owning a property directly
• Alternative assets — cryptocurrency or precious metals, generally higher risk and worth treating as a smaller part of a portfolio rather than a core holding

Spreading your investments across these categories means a downturn in any single one doesn’t take your whole financial position down with it.

Seeking Expert Advice

Working out the right mix isn’t something to guess at. A property accountant can help with the property-specific side of your portfolio. A licensed financial adviser can help build a broader strategy tailored to your goals, risk tolerance, and timeline. The right mix looks different for someone in their 30s building a portfolio than for someone approaching retirement. Worth revisiting periodically, rather than setting once and forgetting.

Worked Example

Priya owns two rental properties and nothing else. Priya’s portfolio is entirely in property, funded with significant debt. Interest rates rise sharply. Her cash flow tightens across both properties at once, since they’re both exposed to the same risk — rising rates — at the same time. She has no other assets to draw on in the meantime. After reviewing her position, Priya starts directing some of her surplus income into a mix of managed funds and a term deposit. That way, a future rate rise or property-specific problem doesn’t affect her entire financial position at once.

Checklist

• ✅ Work out what percentage of your total net worth currently sits in property
• ✅ Consider whether shares, managed funds, or PIEs could add balance alongside your existing property holdings
• ✅ Check the Retirement Commission’s expenditure guidelines against your own retirement plans
• ✅ Review your portfolio periodically, rather than setting an allocation once and never revisiting it
• ✅ Get advice from both a property accountant and a licensed financial adviser, since each covers different ground

Common Questions

Does diversification mean I shouldn’t invest in property at all? No. Property can be a strong core holding. The point is not concentrating your entire net worth in it alone.

How much of my portfolio should be in property versus other assets? There’s no universal answer. It depends on your goals, risk tolerance, age, and timeline. A licensed financial adviser can help you work out what fits your situation.

Is diversification just about reducing risk? Mostly, yes. It smooths returns over time and reduces how exposed you are to any single market’s ups and downs. It doesn’t eliminate risk entirely, though.

Do I need a financial adviser to diversify my portfolio? Not strictly. Professional advice helps you build a strategy suited to your specific goals, though, rather than following generic advice that may not fit your circumstances.

Summary

Don’t put all your eggs in one basket is simple advice, but it’s genuinely useful for New Zealand investors who tend to concentrate heavily in property. Property remains a strong asset. A well-balanced portfolio, though, usually includes shares, managed funds, PIEs, and sometimes other assets alongside it. Diversification doesn’t guarantee a better return. It smooths out risk over time instead, reducing the chance that a single market’s bad year derails your entire financial position, particularly heading into retirement. Review your own mix periodically, and get advice tailored to your specific goals rather than relying on generic rules of thumb.

Talk to EpsomTax.com About Your Portfolio

Whether property should be a bigger or smaller part of your overall portfolio depends on your specific goals and risk tolerance, not a one-size-fits-all rule.

Contact EpsomTax.com to talk through your property position. We can also point you toward a licensed financial adviser for the broader picture. We work with New Zealand property investors every day, and want to help you build wealth across a genuinely balanced portfolio, not just one asset class.