Which tax‑aware investment strategies you should avoid
I get hit up with a lot of garbage every week.
Sketchy deals that only look interesting if you include the potential tax savings.
Take the tax angle away and the investment case collapses.
Sometimes I’m not even convinced the tax angle is real…
When you’re building a taxable portfolio, one rule has to come first:
Never give up economic substance just to chase a deduction.
Two reasons:
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Risk/return comes first. If the pre‑tax risk/return isn’t compelling, the tax tail is just wagging a bad dog.
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The IRS actually cares about this. “I did this purely for tax reasons” is basically the definition of what they don’t want to see.
The question is, how can we be more tax efficient in our approach with things that already have merit based on their risk/return expectations.
That’s where the work is:
- Long/short that stands on its own and harvests losses
- Hedge funds / real estate that actually earn their keep before tax
- Structures that survive both market cycles and IRS scrutiny
If the pitch is 90% tax savings and 10% the investment itself you should probably pass.