Buy, Borrow, and Die

“Hi, thanks for all your great advice. My question is related to the “buy, borrow, die” philosophy for avoiding capital gains. Would you please comment on this? Thanks for all that you do. I appreciate you.”

Let me explain how this works. This phrase got a little bit of press in the last year, I think, because some media outlets picked up the fact that some very wealthy people do this. “Buy, borrow, and die” is basically the idea that it might be better to pay interest than it is to pay capital gains. It all comes down to the step up in basis at death. When you die, your heirs get a new basis. Basis is what you pay for an investment. When you sell an investment, you pay capital gains taxes on the difference between the basis and its value on the date of sale. It's a pretty cool trick to have the basis reset when you die. Then, your heirs can basically sell it and not pay taxes on any of that inheritance that they've received. The idea is you don't want to realize capital gains on your deathbed because they're going to go away as soon as you die.

That's “buy, borrow, and die.” If you need money before you die, then you borrow against your assets. You borrow against your home, borrow against your taxable portfolio, borrow against your real estate, whatever, rather than selling them and paying capital gains taxes. The problem is if you still have many years until you die, you may be better off realizing the capital gains, because that interest adds up over time. If you borrow $1 million dollars against your portfolio to spend, for instance, and you're borrowing it at, let's say, 6%, well that's $60,000 a year in interest, right? How many years does it take before $60,000 a year is a higher amount than the capital gains taxes that you would be paying on those $1 million dollars? Maybe if your basis on that million is $300,000, then you have $700,000 in capital gains, multiply that by maybe 20%. That's $140,000 in capital gains. If you pay three years of interest, you're paying more in interest than you would be in capital gains taxes.

This is a great strategy if you can borrow at very low interest rates. It's a great strategy if you're going to die soon. If you are 55 and in excellent health and interest rates are high, maybe this isn't such a great strategy. If it's something available to you, keep that in mind, especially for maybe your parents, if they are not in awesome health and are needing additional money. Maybe the way to get it is to borrow rather than to sell an asset. Just keep in mind that it's one option.

More information here:

Top 5 Ways to Pay No Tax on Capital Gains and Dividends

Capital Gains on Your Primary Residence

“Hey guys, this is Sam. Big fan of the pod, longtime listener, first time caller. The recent Q&A on tax-loss harvesting got me thinking. I live in a high cost of living area and have seen high appreciation on my primary residence since purchase six or seven years ago. We have over $1.5 million in capital gains accrued on paper. And while my crystal ball is cloudy, I would hope to realize at least $1 million in gains when we sell in 10 or 15 years, if not a lot more than $1 million. Since this is so far above the $250,000 single and $500,000 married capital gain tax free limits at the federal level, wouldn't tax-loss harvesting also be useful in this scenario, particularly in a state with a high state income tax or capital gains tax? Thanks.”

That's more of an observation than a question. You asked one question. There, the answer is yes. If you had capital losses, you could use those to offset your capital gains. There are a lot of different ways that you can use capital gains, or rather capital losses, that come from tax-loss harvesting. The first way is you can put $3,000 a year against your ordinary income. The second way is if you have mutual funds that for whatever reason are distributing capital gains to you; a capital gains distribution that is offset by any capital losses that you have acquired that year or that you've been carrying forward. If you have to sell an investment for whatever reason, you want to use a different investment or you just want to spend the money or you want to rebalance your portfolio and you find you need to sell something that's appreciated a lot in taxable. That's another great use to have some losses around.

If you've got some legacy assets, stuff that you've owned for a long time that have a low basis that you really don't want to own anymore, capital losses allow you to change investments without having to pay taxes on that. If you sell a business, if you sell The White Coat Investor or if you sell your medical practice, or if you sell some side gig business, then that is a capital gain and you can use tax losses from your tax-loss harvesting to offset that. When you sell a real estate property, including some syndications or funds, they distribute some capital gains to you and you can use capital losses to offset those.

In today's day and age, this ability to offset the capital gains on your home is becoming more and more important. It's not just people in the Bay Area and Washington DC and New York that have a high cost of living area. Now there are a lot of places in the country, thanks to rapid appreciation of housing prices the last couple of years, that are pretty high cost of living areas. Anytime you have a significant capital gain on a house, you can use tax losses to offset those. Remember, of course, that the first $250,000 in gains is tax free with your primary residence. I think it's every five years you can use that. Maybe it's every two years, I'd have to look it up. But you have to live there for two out of every five years to get that. If you're married, it's doubled. It's $500,000. But above and beyond that, you have to pay capital gains taxes when you sell your house. If you buy a house for $500,000, you sell it for $1.5 million 20 years later and you're married, you're going to have $500,000 in capital gains that you have to pay taxes on. At 20%, that could be a $100,000 tax bill. If you've got $500,000 in capital losses saved up from tax-loss harvesting over the years, that can obviously offset that.

More information here:

How to Tax-Loss Harvest: What You Need to Know

Disability Policies and Mental Health

“I was recently diagnosed with schizophrenia. And I had to be off of work for five months. Thankfully, I had a disability policy in place so I was able to use this policy to cover my expenses. However, it is troubling to know that the policy only has a 24-month payout for mental illness diagnoses. I think this is a crime. And I wonder if there are policies that don't have this limitation out there. I wonder if you could bring light to this issue, and we could advocate for policies with more robust coverage for mental illness.”

There are many policies out there that have a two-year limitation on mental, or sometimes they call them nervous, illnesses. They're not talking about neurologic disease. They're talking about psychiatric diseases. There are others that have lifetime coverage that treat it just like any other disability. It's not a crime. They put the policy in front of you, and you signed it. You signed up for that policy with that limitation. So, it's not a crime; it's a contract. If you don't like that contract, don't buy that contract. Go to one of the providers that offer lifetime coverage. Now I'm not a disability insurance agent and this sort of thing is changing all the time. My recollection, however, is that the Guardian policy does offer lifetime coverage for mental/nervous disorders.

You could change policies, but in this case, once you've been diagnosed with schizophrenia, it's probably going to be an exclusion from any new policy, I would assume. So, probably not a good idea for this particular doc to change. Hopefully, that is not a lifetime payout. It's per disabling episode. Maybe this doc will get another 24 months if he or she becomes disabled again due to schizophrenia. I don't know; it'll depend on the policy. Be aware that docs do get mental illness. I have a family member who was an attorney who got a bipolar diagnosis, which was disabling. They weren't able to function as an attorney for many years and happened to have a very strong disability insurance policy and lived off of it for a long time. This stuff happens, and it can happen even in your late 20s, 30s, or 40s. Even though you didn't have any sort of mental illness before that time, it can develop. Keep that in mind when buying disability insurance.

More information here:

What You Need to Know About Physician Disability Insurance

Debt Funds

“Thanks for all you do for your audience. I'm a 60-year-old, and I would like the option of retirement in about 3-5 years. I invest in debt funds through a self-directed IRA. These funds are quite liquid. Typically, I have the option to liquidate after holding for six months or more. My plan is to liquidate my position in these investments at retirement, and then roll all of my traditional IRA money into the Roth IRA as my tax bracket would be much lower. Am I thinking about this correctly? I'm trying to stay away from debt funds with longer required holds for this reason. Thanks in advance.”

You're mixing two issues here, Richard, and I don't know they necessarily need to be mixed. You're talking about both the investment within a retirement account—in this case, a private real estate debt fund and the accounts themselves. It's in a traditional IRA now, self-directed traditional IRA, and you eventually want to have it in a Roth IRA. It often makes sense to do Roth conversions, especially in those first few years of retirement before you start taking Social Security. If you retire at 63, you're not going to take Social Security until 70. You have seven years there in which there's a good chance it makes sense for you to do some sort of Roth conversion each year.

Is that easier when you have very liquid investments? Oh, probably it is. Can you not do it with these debt funds? You probably still can. I would contact them and say, “Hey, I'm going to do a Roth conversion. I'm going to move some of my traditional IRA money.” Let's say you have half a million dollars in there. “I'm going to move $100,000 a year of that into a Roth IRA. I want to keep it in your fund, though. Can I just pull it out of this traditional IRA and put it into a Roth IRA? I'll be paying the taxes from separate money. And can that be fine even though I've got the money locked up for a year or two or whatever the requirement is on the debt fund?” They'll probably say yes.

You've got two questions. One is the Roth IRA question. Do you want to do these Roth conversions, and how do you want to do them? The other question is, do you want to stay invested in debt funds? If you do, then you don't necessarily need to be prepared to pull all the money out at any given time in order to do that. Most of the debt funds I have, I think the required hold period is anywhere between 1-5 years. I think they'd let you get it at one year. But I think in a lot of these, the deal is a little bit better for you if you leave it in there at least five years. If you had it in there already for five years, then you could pull that out and reinvest it in that or something else after you do your Roth conversion, no big deal. I think you're mostly thinking about it correctly, but keep in mind that you need to make those decisions separately. What retirement accounts you're going to use when you're going to do Roth conversions is one question, and the other one is what you're going to invest in. You just need to follow your written investing plan as far as that goes.

If you don't have a written investing plan, that's where our Fire Your Financial Advisor course comes in. It is very helpful for people who don't yet have a written investing plan. Every time we do surveys, at least 50% of our audience doesn't yet have a written investing plan. If you don't have one, you need to get one. If you don't feel comfortable writing it yourself, maybe getting a little bit of help from the WCI forum or Facebook group or subreddit, then consider taking our course. That'll take you step by step, help you write it yourself. It'll be dramatically cheaper than the third option, which is going to get a financial planner and paying them a few thousand to help you draft up a financial plan that you can follow. But whatever pathway you take, you should get a written financial plan. It's really, really helpful in reaching your financial goals.

Enhanced Cash Management Portfolio

“I'm in the process of selling my practice and have a sizable sum of cash incoming. My financial advisor has recommended I set aside the income in an enhanced cash management portfolio that returns 1.3% tax-free. Having trouble understanding the nuts and bolts of this investment product offered by a private firm, but they say they invest in money markets, variable rate demand notes, auction rate preferreds, US government treasuries, US public municipal and corporate debt markets, and US listed mutual funds and ETFs. I will eventually use this money to pay taxes and distribute it per my written financial plan. However it is a short medium-term location to store my money. I am considering this. Have you heard of these before or advise against them? Thank you so much for all that you have done and continue to do for us all.”

This sounds a little squirrely, right? Enhanced cash management. That sounds like a product designed to be sold, not bought. Look at all this stuff that is in it: auction rate preferreds, variable rate demand notes, treasuries, etc. First of all, this isn't going to be tax-free, right? Unless it's just muni bonds in there, it is not going to be tax-free. You're going to have to pay some taxes on whatever income is coming out of that. Keep that in mind. If they're telling you, it's 1.3% tax-free, something's wrong. Maybe they mean 1.3% after tax. I don't know exactly, but when you're looking for something with very low risk, you're looking for cash. You have a few options, and the quick and easy way to do it is Google “Vanguard mutual funds by asset class.” What that does is it pulls up all the Vanguard mutual funds. I don't know if it's all of them, but it's most of them. Then, you start at the top with money market funds.

If you look at the Vanguard money market funds there, you can see that right now, the Vanguard Federal Money Market Fund (VMFXX) is yielding 1.54% which is taxable. So, something that's paying 1.3% is not too impressive when you can get that out of a run-of-the-mill money market fund, which basically is a very, very safe place to invest. If you want tax-free money, you can go to a municipal money market fund. The Vanguard one which I've used in the past has a current yield of 0.55%. That's usually not that much lower than the taxable money market fund that's being offered out there. That one's probably going to go up soon in its yield if it returns to more of the historical relationship between those funds.

If you are willing to take more risk, meaning credit risk, the risk that somebody that owes you money is not going to pay you, or term risk, having longer term assets than 90 days to one-year assets, you can do that and get higher yields. If you go to the intermediate-term bond index fund, you'll see the yields up to 3.6%. If you take the short-term index fund, that's yielding 3.28%. So, there's some risk there. As rates go up, you'll lose value, but you're getting a much higher yield than you would on a money market fund. Likewise, if you want to take on some credit risk, you can look at the intermediate-term corporate bond index fund. It's yielding 4.57%. Those are your options when it comes to fixed-income investments. Yes, you can get similar yields sometimes from a high-yield savings account. You just go to someplace like Ally bank and you can get a high-yield savings account.

Do I get super excited about some complex thing being sold to me with a yield of 1.3% when I know that that's what the standard cash things are paying? Not really, not very exciting. I'm not sure I would stick around with a financial advisor that's recommending crap like that to me. If I'm going to have something that's investing in mutual funds and ETFs and all this crazy stuff, I expect a heck of a lot higher yield than 1.3%.

Managed Futures

“Hello Dr. Dahle. I'm a 50-something-year-old gastroenterologist, contemplating retirement soon, and looking at alternative investments that can potentially decrease my downside risk and be somewhat decoupled from stocks and bonds. I'm specifically looking at long short funds and market neutral funds and perhaps managed futures. I have little experience with this, and I was wondering if you had any opinion or experience with it that you could provide. As always, I greatly appreciate what you do with The White Coat Investor. I read it and listen to it all the time. Thank you very much.”

Let's talk in general, then let's talk specifics. First in general, hedging strategies, hedge funds. Do you qualify to invest in these? Yes. You're probably an accredited investor. If not by virtue of your income, by late career, by virtue of your wealth. You qualify to invest in these things, and you can invest in them. However, I recommend if you choose to do so, that you keep it to a relatively small percentage of your portfolio, certainly a single-digit amount, just like if you were going to invest in something else that's kind of oddball or creative or alternative. Limit the amount of your investment that you're putting into those sorts of investments. In general, the thought with these hedge fund kind of investments is that they're probably not worth the fees you're paying. If you look at long-term returns of hedge funds against boring old stock index funds, the stock index funds tend to do better. Now, does that mean they do better at all times? No. When stocks are not doing well, anything that is not stocks is going to do a little bit better. Don't be surprised that there are times when a hedge fund or particular hedge fund strategy is going to outperform the stock market.

But keep in mind that the ones that don't outperform tend to disappear. There were a lot of investors in those funds that did not do very well, and some of them blow up spectacularly. You are allowed to do a lot of crazy stuff inside a hedge fund. It really comes down to the manager and what they're doing and how much you trust that manager to have your best interests at heart. Because a lot of them are taking an awful lot of risk because of the way they get paid. The classic way a hedge fund manager gets paid is 2% and 20%. Two percent a year plus 20% of profits. Two percent a year is obviously an incredibly huge expense ratio if all they're doing is messing around in the stock market. One percent might be average, but I think it’s a really high expense ratio for a mutual fund. I'm looking at mutual funds with an expense ratio 1/10th of that. So, 2% seems outrageous. Then, to also lose 20% of your profits, they've got to be really talented at bringing you alpha, bringing you return above and beyond what the market will return you in order for that to be a good deal.

In general, I’m not a huge fan of hedge funds. I’m not a huge fan of hedging strategies. I prefer to use a strategy where you just realize you're going to be investing for a long term, for a long, long time, and that you can ride out the market ups and downs and be rewarded with those solid long-term returns by doing so. Now anytime people start talking about managed futures, I figure commodities are doing well. Commodities tend to do well in times of high inflation. Given inflation's been pretty high the last six months, it shouldn't be any surprise to see commodities doing pretty well.

In fact, if I look at last month's WCI newsletter, that includes a market report. If I look at our selected investment for commodities there, which is an ETF with the ticker symbol GSG, it didn't have a great July, but it's having a heck of a year. It's up 31%. Over the last 12 months, up 44%. Over the last five years, it's up 14% a year. So, no surprise that people are interested now again in commodities, right? The way people typically invest in those are managed futures funds. If you want to have an allocation to commodities, again, I'd keep it to 5%-ish of your portfolio. But stick with it through thick and thin, because there are a lot of times when commodities do not do very well. In the long run, they tend to do about what inflation does, similar to precious metals but with a heck of a lot more volatility.

I’m not a huge fan of either one. If you want to invest in them, you're convinced by the case for including it in your portfolio, then go ahead. Just limit how much you put in there. Same thing I'd tell you about gold. Same thing I'd tell you about crypto assets. Limit your investment there. It's not something I’d put 40% of your portfolio into.

More information here:

Can Doctors Also Be Successful Investment Managers?

Title Insurance

“A review of title insurance would be interesting content. There is a paucity of quality information on these policies. Often what people get is dictated based on what a lender requires. I would love to be more knowledgeable about these policies—what they cover, what they don't. I would love to hear some stories about why and when claims came up and what happened. Consensus seems a necessary part of risk management for everyone. You might face big problems if you don't have it. I don't really understand the risk being mitigated and how the insurance does that. If someone is willing to write the policy, does a risk really exist?”

Title insurance is something you buy when you buy a property. Whether it's an investment property or whether it's a home you're going to live in. What it does is it protects you from any other claims to that title. What are some examples of other claims that might be on that title? Let's go through a few of them here. Some problems that you'd want to discover in a title search or for which you would need to have title insurance include outstanding liens. When somebody does work on a property and they don't get paid for it, they often put a lien on that house. There's a lien on the title, and until it gets paid off, you don't really own it free and clear. Back taxes or property taxes can have a lien on them, as can conflicting wills. If somebody else can come back and say, “That person didn't really have the ability to sell that house because I own half of it because the will says I'm supposed to own half of it.”

Those are the sorts of problems you can have. Now, what do these title insurance companies do? They do research to make sure none of that stuff's out there before you buy the house. The title insurance is basically like a little guarantee on their research. They're saying, “Yeah, we looked, we didn't find anything, but just in case for whatever reason we missed something, we'll take care of it.” That is what title insurance is. Lenders generally do require you to have it. In fact, there are sometimes two types of title policies. There's the homeowner’s policy. That's a guarantee against potential hazards. Whether it's a lawsuit or a lien or flawed public records or fraud or forgery with regards to that title easement that weren't disclosed to you, those sorts of problems. Then the lender, assuming you didn't pay cash for this property, is going to always require that you have a lender's title insurance policy. That protects the lender in the same way from all those same sorts of claims. I don't know that I necessarily know anybody who's had to use their title insurance, but I've heard lots of stories where people uncovered something in the title search process.

There is one other alternative, apparently. You can get a warranty of title, and I suspect this is probably state specific. But that's where the seller guarantees that they have the legal right to transfer ownership to the buyer and that no one else can lay claim to the property. If someone else has a claim to the property, the warranty gives the buyer the ability to go after the seller in the future. Whereas without that sort of thing, you wouldn't have the ability to do that. That's kind of title insurance in a nutshell. Everybody buys it. I don't know if that is going to change anytime soon. If you're buying a property, you probably ought to buy it, as well. It's not that expensive. I think most honestly, though, what you're paying for is the title search. I think the policy is relatively cheap once the title search has been done. It’s not someplace I'd try to skimp out too much.

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Full Transcript

Transcription – WCI – 275

Intro:

This is the White Coat Investor podcast, where we help those who wear the white coat get a fair shake on Wall Street. We've been helping doctors and other high-income professionals stop doing dumb things with their money since 2011.

Dr. Jim Dahle:

This is White Coat Investor podcast number 275 – The buy, borrow and die strategy.

Dr. Jim Dahle:

Getting quality disability and life insurance should be the first financial chore for a doctor to complete. Most docs don't have the ideal policy for their gender, specialty, state, or health status and 1 in 7 doctors get disabled at some point during their career. Because these policies can only be purchased throu

16 comments

1Dave |  MST

If I had to pick one thing about estate / death taxes that needs to change, it is having BOTH an exemption AND stepped up basis. It should be one or the other, not both. Horribly unfair to basically tell the well off they can completely escape taxes on gains. Stepped up basis came about because brokerages didn’t use to track basis and gains, so the family could not calculate basis easily after ones death. Thats no longer the case.

Reply

The White Coat Investor |  MST

It’s still the case for lots of assets. Those gold coins bought in the 80s. That cabin bought back in 1974. Lots of elderly folks have mutual funds or stocks bought decades ago too. I think the step up in basis is good policy. It’s not just about brokerage accounts.

An exemption of some sort is also good policy, just to eliminate the hassle from most people’s lives. Reasonable people can disagree on how big that exemption should be, of course. Without it people are having to value every table and heirloom etc. Terrible policy.

At any rate, these aren’t just about taxing the wealthy. They’re also about taxing their heirs, which may or may not be wealthy.

Reply

Rex |  MST

The problem is allowing loans to purposefully avoid taxes with really no other purpose . The very rich don’t need loans and the poor can’t play the same game bc they don’t “own the bank” and can’t get the same sweet deals.

Reply

The White Coat Investor |  MST

You don’t think people should be able to borrow against their homes, cars, whole life insurance, and portfolios? Really? Or you don’t think borrowing should be tax-free? What policy are you arguing should be changed exactly?

I get that lots of people are jealous of those with more wealth than them or think the wealthy don’t pay their fair share, but practically speaking, why shouldn’t the wealthy have the same opportunities as everyone else like lower long term capital gains rates or a step up in basis at death or the ability to borrow against assets?

Reply

Rex |  MST

No they don’t. The rich get crazy low interest rate deals. That isn’t the same.

The problem is intent and intent does matter. Loans are being used to never pay taxes. And the loans are never needed. It’s not like they had to have those loans.

I’m not jealous. Just bc you can get away with something doesn’t mean you should.

Reply

The White Coat Investor |  MST

You don’t think someone should be able to borrow money unless who, some committee?, you?, the gubmint? somewhere decides they need it?

And how much of a better deal do the rich really get? Well, Joe Blow can borrow $100K from Interactive Brokers at 3.3% variable. Rich Stanley can borrow $100M at 2.83%. Yes, they get a better rate. But that doesn’t seem “crazy lower” to me.

https://www.interactivebrokers.com/en/trading/margin-rates.php

Seems pretty much the same thing to me. It sounds to me like you don’t want “the rich” (whoever they are) to be able to do what you are able to do. Or perhaps you don’t want anyone to be able to borrow money? I dunno. Where you gonna draw the line? If you are worth $10 million you can no longer legally borrow money? $100M?

Reply

Rex |  MST

If I make a plan and kill you that’s murder. If you break into my house and I’m at risk. It’s self defense . One is crime but same outcome. Intent matters.

The bezos etc are under 1% with their loans. Those are attempts to avoid taxes.

All tax laws are in essence a committee. The line can be drawn just like tax rates or everything else.

Reply

The White Coat Investor |  MST

This is very pie in the sky if your plan is to somehow gauge people’s intent when they take out a loan to decide whether it’s legal or not.

No, the line cannot be drawn “just like tax rates.” Those are hard numbers. If you think the rich need to pay more in taxes, there are better ways to get the money than cracking down on this strategy. Raise income tax rates. Raise capital gains and qualified dividend rates. Raise the estate tax rates. Decrease the exemption amount. Heck, it would be easier to eliminate the step-up in basis at death than do this. Your suggestion is really impractical in my opinion.

Reply

Rex |  MST

Not really. You are already made several suggestions. The idea like you alluded to would actually be to reduce the incentive. Now im not holding my breath. We couldnt get rid of carried interest bc one democrat wouldnt so im sure somebody will defend whatever. Now you actually wouldnt want to raise capital gains rates bc that actually promotes this issue. But lets just say you wanted to make the tax law only about loans. You could if you wanted come up with restrictions on what loans are tax free. Im not suggesting that by the way. I do think an elimination of step up basis at a certain threshold would be easier to do (and when i say easier i just mean less impossible).

As you posted below for many people these schemes have the real problem of interest having a good chance of being worse than the taxes. When you can force the loan to extreme low interest then that becomes much less of a problem.

Reply

2Jeff |  MST

Hi Dr. Dahle,

Thanks for all that you do.

Unless I’m mistaken, you may be underselling the “buy, borrow, and die” strategy.

First, the interest rate that you used in your example was 6%. This seems high. Was this based on average HELOC rates? I believe that investment portfolio loans can be obtained for rates in the 1-2% range. I realize that there is a risk in borrowing against equities, but as long as the amount borrowed is a relatively small percentage of a diversified portfolio, the risk should be reasonable.

Second, by borrowing against an asset rather than selling it, the asset is presumably still appreciating in value while the borrower is paying interest on the loan, hopefully appreciating at a significantly higher rate than the interest rate of the loan.

If so, the strategy not only saves capital gains tax, but also would potentially increase long term gains.

Am I missing something here?

Thanks again.

Reply

The White Coat Investor |  MST

The best rate I know of right now on margin loans is 3.08% variable (for $1M+) at Interactive Brokers. 1-2% is long gone. Whether you should expect to be able to borrow money at 3% long term is anyone’s guess.

https://www.interactivebrokers.com/en/trading/margin-rates.php

“Presumably” and “hopefully” means there is risk. You have to account for that. But sure, I suppose it is likely that will occur, albeit at the cost of more risk.

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Greg |  MST

I think most people are massively overselling the use of the buy borrow die strategy. You can Google rich people’s stock sales, and almost all of them still sell stock. There’s a reason: the strategy is not that great. If the strategy was great, surely they’d almost all be doing it and yet hardly any of them are.

Many super rich people want to diversify their risk, not amplify their risk. Most super rich typically aren’t that diversified, as they got super rich because the company they founded blew up. If Bezos has near 100% in Amazon, he doesn’t really want to have have 120% in Amazon. Which is why he’s sold many billions of stock instead of borrowing against it. Google all the Forbes richest list and most of them sell stock regularly. The exceptions are probably the ones that get regular fat dividend checks (which is similar to selling as you get cash out of the stock and paying ltcg tax rates on it).

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The White Coat Investor |  MST

Yea, I agree with that. In the long run, interest could easily cost more than the taxes too. It’s not like the buy, borrow, and die strategy is free.

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3Mister MSTR |  MST

Incidentally, this is what Michael Saylor says about BTC which is the most pristine asset around, and is deflationary as a feature, which plays perfectly into the mix here. What’s more, unlike real estate, you own it, forever, and it doesn’t break down. I mention that because jurisdictions can hammer you with higher property taxes if not confiscate your property in that regard or more directly, quite easily.

The reason people sell stocks is because of diversification, yes, but more because we live in bubble-inflation land and the highest liquid game that still allows 20% capital gains rates (with the largest markets) is the stock market casino game.

The reason people don’t like BTC is because they don’t like volatility, or can’t hack it, and they haven’t done their homework. From here on out it’ll crush every asset, again – just like it has crushed every asset for years now, over pretty much any time period. You just have to do your homework and understand that short term “winters” are what get you that huge return longer term. When you know, you know.

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The White Coat Investor |  MST

A true believer.

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Rex |  MST

You’ve gotten kind in your old age😜

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