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Most people think taxes are unavoidable once their investments grow. But billionaires play a completely different game. In this episode, Sharran breaks down the single strategy the wealthiest individuals use to access liquidity without selling assets or paying capital gains taxes.
You’ll learn how securities-based lending works, why borrowing is not a taxable event, and how billionaires like Elon Musk, Jeff Bezos, and others use their portfolios as personal banks. More importantly, Sharran explains how this strategy applies to everyday investors with far smaller portfolios.
Sharran also walks through the real risks—margin calls, interest rate exposure, and poor capital allocation—so you understand when this tool is powerful and when it can destroy wealth.
If you want your money to keep compounding while still funding real estate, business growth, or new opportunities, this episode gives you the playbook.
“The greatest hack in wealth creation is to become your own bank so that you can borrow from yourself.”
– Sharran Srivatsaa
Timestamps:
01:16 – How billionaires avoid taxes without loopholes
03:05 – Why selling assets triggers wealth destruction
05:17 – Securities-based lending explained step by step
06:51 – Real example: Borrow vs. sell
10:26 – Margin calls and how investors get wiped out
11:30 – Safe borrowing rules to protect your portfolio
13:23 – How to set up a securities-backed line of credit
15:25 – Key takeaway from today’s episode
Resources:
– The Next Billion by Sharran Srivatsaa
– Board Member: ARC Multifamily Real Estate Investing
– Board Member: The Real Brokerage
Connect with Sharran:
– X
– YouTube
– Threads
Transcript:
[00:00:00] Hey, this is Sharran Srivatsaa. Welcome back to the Business School Podcast. And this episode, I’m gonna tell you about how billionaires avoid taxes. Not all these crazy strategy, but the one specific strategy that most billionaires use to avoid taxes. How does Elon Musk use this strategy to buy Twitter? How does, uh, Jeff Bezos use this strategy to fund his space travel and Blue Origin?
[00:00:21] Ha. How does Mark Zuckerberg use this strategy to keep his wealth and buy his mega yacht? Each of these are strategies, not just what they can do, but you and I can do as well. I break this all down step by step. Starting right now.
[00:00:42] One thing is for certain. Just because it’s tried and true doesn’t mean it’s working right now. So the big question is this, where can you learn what is working right now? The strategies, the tactics, the psychology, and the exact how to, how to grow your business, how to blow up your personal brand and supercharge your personal growth.
[00:01:04] That is the question. And this podcast will give you the answer. My name is Sharran Srivatsaa, and Welcome to Business School.
[00:01:16] Okay, today I’m gonna tell you about how billionaires avoid taxes. Pretty crazy, right? So quick backstory. I’ve been investing for over 20 plus years. The crazy part is if you are in the stock market at all, and not that you should buy stocks, but I didn’t know much before I bought Apple when it was $5 a share, which is crazy my because of that, and I haven’t sold much.
[00:01:36] My portfolio today has. Millions of dollars in baked-in gains. So if I sold any of these quote stocks, I trigger a massive taxable, and we’re talking hundreds of thousands of dollars going straight to the IRS, so I don’t sell them. Instead, I don’t sell any of it. Instead, I’ve learned to borrow against them. In fact, this is how Elon Musk borrowed.
[00:01:54] Over 12 and a half billion dollars to add to his portfolio to buy Twitter without selling a single share of Tesla. If you know, this is how Jeff Bezos funds his lifestyle and you know, Blue Origin his base company without selling any Amazon stock. This is how Mark Zuckerberg taps into his wealth without triggering any capital gains tax.
[00:02:14] And here’s what kind of, a lot of people just don’t know. You don’t need to be a billionaire to use this strategy. If you have a portfolio in just an investment portfolio, you can do this on your own. Now, the crazy part is, there’s two ways to do this, and I’m gonna explain both those ways for you in just a second.
[00:02:31] But, uh, there’s two ways to do this, but I’m gonna bake down exactly, um, one of these ways. So one way to do this is to use a strategy called, uh, infinite Banking. Which means that you use a, you know, an engineered system of whole life policies based on residual cash value to use it as a way to be your own bank.
[00:02:52] And so when you fund these policies as a cashflow system, you’re now able to borrow from your own bank. Now, this is not that. I’m trying to [00:03:00] tell you about how billionaires don’t pay taxes, especially the ones that have portfolios. Today I’m gonna tell you about something called securities-based lending, and it’s one of the most powerful wealth tools available, and I wanna show you how you can kind of use it in your life.
[00:03:13] So let’s kind of get into it. Lemme give you the big picture here. Say you bought, I’m just making this up. Say you bought a hundred thousand dollars’ worth of stock like 10 years ago, and say today it’s worth $500,000. You currently have a $400,000 gain sitting in your account. You don’t have any taxes on it because you didn’t actually sell it.
[00:03:29] Now, say you want to buy a rental real estate property, or maybe you need cash to expand your business, or you just want some liquidity for an opportunity that came up, most people would say, you know what? I got this $500,000 worth of stock. Let me just go sell that. But here’s what happens when you sell the, you know, Uncle Sam comes knocking and says, Hey, you owe capital gains on that $400,000 gain.
[00:03:52] If you’re in California like I am, you’re paying about. 37% in federal and state taxes, plus California taxes. That’s roughly $158,000 just gone, just like that. So your $500,000 in stock becomes $350,000 after taxes, maybe significantly more. You, that’s conservatively. Now, lemme show you another way. Instead of selling your stock, you go to the bank where your portfolio is held.
[00:04:15] So maybe your ba, maybe you have your portfolio at Goldman Sachs or Morgan Stanley or Charles Schwab, or Fidelity, doesn’t matter. And you tell them, Hey, I have $500,000 in stock. Can I borrow against it? And the bank generally says, sure. And they’ll say, we’ll loan you $250,000. Now, they won’t give you dollar for dollar based on stock is generally in the 40 to 50% loan to value range, based on the mix of the portfolio.
[00:04:39] The banker will tell you what they can actually give you, and that’s it. You get the cash. You still own all the stock, the stock keeps growing ,and you don’t have to pay a single dollar in taxes because you didn’t sell anything. By the way, this is not a loophole. This is a standard practice. This is called a securities-based line of credit, or, and once I learned the strategy, I stopped selling.
[00:05:01] Any of my investments altogether. By the way, the first time I actually learned this and saw it being done at scale was when I was a banker at Goldman Sachs. When several of my clients came to me and they’re like, Hey, listen, I, we want to borrow against our portfolio. I was like, huh, that’s crazy. You can just borrow against your portfolio.
[00:05:15] That’s insane. So let’s, you may say, well, how does this actually work? So lemme break down kind the mechanics for you. ’cause I think it’ll be really helpful to you, even if you have a small portfolio, you can do this. When you use your portfolio as collateral for a loan, a bank is almost taking no risk, right?
[00:05:31] Why? Because they’re holding your portfolio. So if the market crashes in some way and you can’t pay them back, they’re just gonna sell your stock and then they’re made whole. That’s why the interest rates on these loans are really incredibly low, because they already hold your collateral. It’s not like the bank that’s giving you a mortgage now has to, if you default on your home, now has to come and, you know, evict you from the house and then find a realtor and put your home on the market and then wait for 30, 60, 90 days to sell and then sell it at a discount and go through the process and like, it’s just a ping, right?
[00:06:04] The bank doesn’t have to do any of this. They just have your portfolio, as in, when the math doesn’t work, they can sell your portfolio. Right now, you’re looking at, based on where rates are right now, you’re looking at somewhere in the 5 to 7% range, based on the size of your portfolio and which bank you’re working with.
[00:06:17] Compare that to a credit card at like 20 to 35% or a business line of credit at 12 to 14%. This is cheaper money because the bank has your collateral already. Now, here’s the important part. Banks will typically loan you like roughly 50 to 70% of your portfolio. That’s called Loan to Value or LTV, and that’s based on the mix of your portfolio.
[00:06:37] So if you have a million-dollar portfolio, they can loan you anywhere between 400,000 and $700,000, but you don’t have to take the full amount. You could borrow 50,000 or a hundred thousand kind of whatever you need at that time, and you only pay interest on what you actually borrow. It’s all, it is a line of credit.
[00:06:51] So, lemme give you a real example from my own life. So, a few years ago, I had an opportunity to invest in a real estate deal, and I needed kind of $200,000 ish for the down payment. I could have totally sold some stock to get the cash, and that would’ve triggered 60, $70,000 in taxes. Instead, I borrowed $200,000 against my portfolio at 60% interest.
[00:07:10] I used that money to buy the property. The property cash flowed and appreciated. My stock in the portfolio kept growing, and I paid about $12,000 a year in interest, which was tax-deductible because I used the loan for investment purposes. Now think about that. Even the interest that I paid on my. On, on, my borrowing from the portfolio was tax-deductible because I used it for investment purposes.
[00:07:32] So instead of losing $60,000 to taxes, I paid $12,000 in tax-deductible interest and kept all my stock portfolio working for me. That is the power of the strategy now. Here’s where it kind of gets a little better. That $12,000 is an interest. It’s tax-deductible if you use the borrowed money for investments or business purposes.
[00:07:52] So you can’t deduct it if you use it to buy a boat or a Lambo, or you go on a vacation. But if you’re reinvesting it, the IRS lets you deduct the interest, so you’re borrowing at a lower rate, keeping your investments compounding, and then deducting the cost of the loan and actually taking that borrowed investment, investing in something else.
[00:08:12] This is. But you have to realize that the tax code is not built to penalize you. Your tax code is literally telling you where they’re gonna penalize you and where they’ll go. They’re going to incentivize you that they, they’re literally in doing this to, to incentivize you, to invest more in the economy.
[00:08:30] This is by design, so. This is not a loophole, and the goal for you is to never have to sell your appreciated securities, and you just borrow, that’s what the wealthy do. So here’s kind of like the, let me give you the billionaires playbook, right? ’cause we have to think about how this works at scale. So let’s take an actual live example.
[00:08:47] When Elon Musk bought Twitter for $44 billion, he didn’t liquidate his Tesla position. If he sold enough Tesla stock to fund that deal, he would’ve owed billions of dollars in capital gain tax. So what did he do? He borrowed 12.5 billion dollars against his Tesla shares, and the bank said, oh, hey, sure, Mr.
[00:09:06] Crazy. Half an alien, Elon Musk, you have hundreds of billions in Tesla stock. We will loan you 12.5 billion. No problem. The that borrowed money is not taxed because it’s a loan and it’s not income in any way. So he’s gonna get the cash. The bank gets collateral, and the IRS gets nothing. In this case, his Tesla stock stays in his account.
[00:09:26] It keeps growing, and it doesn’t trigger a single dollar in taxes. By the way, Jeff Bezos does the same thing. He owns about 10% of Amazon. That’s worth. Over a hundred billion dollars. He doesn’t sell Amazon stock to fund Blue Origin or buy mansions or whatever else he’s doing. He borrows against it. The big men, Zuck does the same exact thing.
[00:09:45] Larry Ellison at Oracle does the same thing. Warren Buffett has used variations of this for decades. This is not a secret strategy. This is not a loophole. This is how wealth works at the top. If you just understand that you can use your existing portfolio as collateral. You don’t have to be a billionaire to do this.
[00:10:02] You, if you just have a portfolio and an investment account, most banks will work with you because some, and some banks require like some minimums. But the point is that this isn’t for the ultra-wealthy. It’s for anyone who understands that keeping your money invested and compounding is way more valuable than cashing out and triggering taxes.
[00:10:20] Right? So you may say, well, Sharran, okay. There can’t be no risk whatsoever. Okay. There are, there are some risks. So there are risks. The biggest risk is actually called a margin call. Let me explain how a margin call works. Let’s say you borrow $500,000 against a million-dollar portfolio; that’s a loan-to-value of 50%.
[00:10:38] Everything’s cool, right? But then the market starts going. Your portfolio drops from, say, a million dollars to $700,000 overnight. I’m just making up numbers. So your portfolio drops 30%. Now your $500,000 loan is 71% of your portfolio. The bank doesn’t like that. They want you at 50% or 60%. So they call you and say, Hey bro, you need to either pay down the loan or you need to add more collateral.
[00:11:02] That is called a margin call. If you can’t do either, they have the right to sell your stock to then bring the loan back into their compliance level. That is a forced sale. That for sale triggers, taxes, and locks, and losses. No fun. This is what destroyed a ton of people in 2008. They borrowed heavily against their portfolios.
[00:11:21] The market crashed. They got margin calls they couldn’t pay. The bands liquidated their positions at the worst possible time, and that’s where the pain happened. So here’s if you were gonna do this. Of course, everything has a risk. If you were gonna do this, here’s the rule. Never borrow like 30 to 40% of your portfolio value at any given time.
[00:11:39] Even just not more than that, right? So even if the bank will give you 70% loan-to-value, don’t take it. You gotta give your, especially if you’re just getting started learning how to do this. You gotta give yourself some cushion so that even if there is a little market drawdown and you know, we’ve had a lot of market drawdowns, some of the deepest ones have been like 30%.
[00:11:59] You are still nowhere near a margin call when you do that. The second. Risk is an interest rate risk. So the first risk is a margin call. The second risk is an interest rate risk. These are these loans just like a home equity line of credit, or a HELOC, if you will, or they call it a second mortgage. They are variable rates, meaning they kind of float with whatever the short-term rates are.
[00:12:20] If the rates go up, you’re kind of like active interest costs will go up. You need to kind of make sure you can afford the payments, even if the rates spike, right? That’s important. The third risk is. You know, kind of economically speaking, opportunity cost. If you borrow $500,000 at 6% and you invest it in something that only returns 4%, you are gonna lose money.
[00:12:39] ’cause it’s not a 0% loan. The borrowed money needs to work harder than the cost of the loan. By the way, I really like this. My money coaches, Russ Morgan and Joey Mure, taught me that, you know, every dollar has a job, but there’s also cost of capital. So if you have a potential investment. You’re borrowing money either from your investment, infinite banking system, or from your, you know, securities-based line of credit, and it’s at 6%.
[00:13:04] You know very clearly that you have to invest in something that is better than 6%. You can’t phone it in. It gives you investing discipline, which is really, really good. So if you use it strategically for real estate or business growth or investments that you have vetted, then this can be one of the most powerful tools, kind of in your wealth-building quiver, if you will.
[00:13:23] So how do you actually kind of do this? Let me kind of break it down, if this is interesting to you, you need to have some kind of investment account with a brokerage that offers securities based link, and most of the big ones do. Goldman Sachs, Charles Schwab, Fidelity, Merrill Lynch, Morgan Stanley. You can just call them and ask, Hey, do you offer.
[00:13:38] You know, securities back line of credit, or can I borrow against my portfolio? If they do, they’ll just walk you through the application process. It’s really simple. Step two, they are gonna evaluate the mix of your portfolio. They’re gonna look at what you own. If it’s all B chip stocks and index funds, they’ll probably be more generous with the loan-to-value.
[00:13:56] If it has more bonds, you probably have a better shot at a higher [00:14:00] loan-to-value, because bonds fluctuate less. If it’s all speculative, like tech stocks or crypto, they might not lend. At all, or they offer a lower load value. Step three, they’ll give you a credit line. Let’s say they approve you for $200,000.
[00:14:13] The money’s just sitting there ready to use. You don’t have to pay interest until you actually borrow from the line. Step four: When you need the cash, you pull from the line. The money hits your account in a day or two, you use it for whatever you need, and you only pay interest on what you borrow. Step five.
[00:14:28] You pay back the loan whenever you want. There’s no real fixed term on this. As long as your portfolio is kind of backing the loan that they already have. You can pay it off in a year or two or years, or two and a half years, or five years, or whatever, or never pay it off as long as you’re making the interest payments that they own right now.
[00:14:45] Here’s the crazy beauty of this. Once you have a line of credit set up, it’s just there for you. You can use it again and again. It’s like having a bank inside your portfolio. I, I, I will tell you, I’ve been using the strategy for 20 plus years. I’ve borrowed to buy real estate. I borrowed investment in private deals.
[00:15:00] I borrowed to fund business opportunities. I’ve almost never sold a stock. In fact, I hate selling stock. I am a buy-and-build kind of guy, and my, like, I still have my Apple shares that I bought for $5 sitting in my account. My other long-term holdings are, they’re still there. They’re still compounding because the greatest hack in wealth creation is to become your own bank so that you can borrow from yourself.
[00:15:22] So here’s kind of what I want. I would love for you to take away from this. When you sell something, and you realize a gain that’s a taxable event, borrowing is not. So if you have investments that are have appreciated, don’t sell them to get cash. Consider borrowing against them, and that way it keeps your money invested, it keeps it compounding, and you and use the borrowing capacity to fund whatever opportunities that you have, because that way it’ll make you disciplined on what you actually invest in.
[00:15:46] You may not have the portfolio right now, or you may. You may not invest right now, or, or, or you, or you may be thinking, how does, how do these billionaires do it? I just wanted to give you this playbook for understanding how securities-based lending works overall. Hey, by the way, if you like this, can you do me a favor?
[00:16:01] Can you screenshot this and tag me that way? I can make more like this for you. I have no idea if you like this or if you share this with a friend. They’re like, now they realize how the, you know, people with portfolios can borrow against them. So if you like this, screenshot this and tag me, and I will make more like this for you.
[00:16:24] Hey, this is Sharran. I have an awesome free gift for you just for listening to the podcast. As you may know, I’ve got a chance to build $2 billion companies the hard way. So if you like this episode, you’ll love getting the exact playbooks from those wins. It’s on my Substack, called My Next Billion. It has the exact frameworks I wish someone had given me when I was figuring it all out. Now you get the real lessons from the trenches as I go for a three-peat and build the next billion. So everything’s free at mynextbillion.com. Please check it out at mynextbillion.com.