I recently met a very successful couple (both entrepreneurs) who had built substantial wealth in a taxable account.

Their portfolio was generating strong returns.

It was also generating a large annual tax bill.

As a taxable investor, interest, dividends, and realized gains aren’t harmless. They slow the rate at which wealth compounds.

The goal is to compound capital with minimal tax friction.

And contrary to popular belief, you don’t need to give up expected return to get there.

For portfolios of this size, structure matters more than individual investments.

A few examples of how we think about it:

• Carving out equity exposure for a long/short SMA overlay
  • → potential alpha + capital losses + margin interest that can offset dividend income

• Using low-basis index exposure as a borrowing base
  • → avoids triggering large capital gains when liquidity is needed (box spreads instead of selling)

• Allocating to tax-aware hedge funds
  • → uncorrelated return streams + potential ordinary losses to offset taxable income and enable tax-shielded Roth conversions

• Adding tax-efficient real estate exposure
  • → 4–6% cash yield often shielded by depreciation + long-term appreciation potential

• Considering securitized affordable housing loans
  • → +10% tax-exempt yield by levering a high quality asset pool

The difference between a pre-tax optimized portfolio and an after-tax optimized one is enormous over time.

Especially when you’re compounding eight figures.