Precipice looms if franking rules change

Precipice looms if franking rules change. Is your portfolio too reliant on franking? Diversification - spreading your investments across a variety of assets - means you're not overly exposed to the vagaries of luck. In particular it helps avoid cliff risk - the chance your investments might fall over one. A company's share price can collapse when affected by a change in law. Law changes can have a large impact on entire classes of shares, or the sharemarket generally. For instance, consider the current financial inquiry and the push by some to do away with dividend imputation, better known as franking. If you've got a diversified portfolio you don't have too much to fear from franking credit changes or one-off risks generally. But if you're loaded up on financials, hybrids and Telstra, you might be at more risk than you expect of your portfolio value dropping off a cliff. (VIEW LINK)