I am unable to easily find resources on smart trades to help preserve wealth. Are there good resources to find historical accounts of people making smart moves to avoid taxes or increase wealth by making trades that are "complex" or unintuitive?

Some examples of "smart" trades I am referring to:

Given the scenarios of either having unvested shares or having vested shares that you don't want to sell because you're confident about a future rise in price (and you don't want to pay taxes now), how does one learn different strategies to optimize for capturing the most value?

  • 2
    Honestly, if you have significant enough resources to need this information, you are better off hiring a CPA or tax professional to help you plan your finances for the most favorable tax treatment. – JohnFx Aug 16 '20 at 1:23
  • I ask to be well-informed when going into those conversations. – quantfinancequest Aug 16 '20 at 1:47

You've lumped a bunch of ideas together but the results of each are different:

Mark Cuban maintained the value of his unvested Yahoo stock through the entire dot com crash with his custom collar.

Adding a no/low cost collar to long stock is a common and easy way to lock in gains. It converts an equity position to a vertical spread. However, you have a short call which not only limits your upside potential but if you are assigned, you gains will be realized and you have to pay taxes, something that you said that you want to avoid.

Musk (and other CEOs) pledge their stock as collateral for personal loans in order to have cash on-hand.

This has nothing to do with preserving wealth. You're just borrowing money.

Short selling against the box.

For tax deferral, this is illegal. Otherwise, it locks in your position with no potential for gain or loss. The drawback is that you pay a stock borrow fee - inconsequential for a liquid large cap where it's less than 1% a year but higher for lower tier stocks.

Maximize tax-deferred retirement accounts.

This shelters future gains but it does not preserve existing wealth or reduce market risk.

Invest in Qualified Opportunity Zones.

This is more of an investment choice with tax benefits than a risk management strategy.

One strategy that you didn't mention was buying puts but the cost is not insignificant and adds a lot of drag to a portfolio.

  • Thank you! A clear explanation like this is exactly what I was looking for. The additional information at the bottom of your post is wonderful and I will continue to research! Thanks for helping clarify my understanding! – quantfinancequest Aug 16 '20 at 0:49

Not the answer you're looking for? Browse other questions tagged or ask your own question.